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Analysts at ANZ explains that the New Zealand’s short end has rallied modestly, largely on the back of a narrowing in bills-OIS through the quarter-end (and year-end for some banks).

Key Quotes

“Technically there is room for this to go further with the IRS curve not yet pricing in cuts (unlike in OIS), and strategically we like playing things from the long side. However, we don’t think there is a large directional play just here as it is still all about the data and there doesn’t appear much on the near-term horizon to see cuts priced more aggressively.”

“In fact, the upcoming data, headlined by Q3 CPI, could look reasonable. The roll and carry on offer in short-dated IRS is still attractive, and that is likely to cap yields, but the discussion around RBNZ cuts is shaping up as a slow grind rather than something that is going to develop quickly.”