By Kymberly Martin
NZ swap yields closed up 2-3bps yesterday across the curve. Overnight, US 10-year yields consolidated around 2.13%.
There was little to excite the NZ market yesterday as it awaited the RBA meeting late in the afternoon.
In the event, the RBA left rates unchanged as expected. It kept its easing bias but appears to be quite comfortable with current policy settings. It sees reasonable prospects for a pickup in global growth ahead and locally expects that the easing in policy so far will continue to boost growth prospects over time.
Our NAB colleagues view is that one more rate cut ahead is now looking a close call. The RBA still sees the currency as high relative to commodity prices, but downside data surprises will be needed to induce another cut.
Stronger data could mean no further cuts eventuate. The market’s response to the meeting was fairly muted. AU short-end swaps closed up 2-3bps, leaving NZ-AU spreads little changed.
Overnight, in the backdrop of fairly thin data flow, US and German 10-year yields consolidated around 2.13% and 1.54% respectively.
Early this morning the OECD was reported as saying NZ will need gradual interest rate increases. “Economic slack will dissipate over 2013-2014 and, as inflation pressures emerge, monetary stimulus should then be gradually removed”, the OECD said in its biannual review of the NZ economy.
This is consistent with our own view which continues to see a first 25bps OCR hike in March next year.
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