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Analysts at ANZ continue to think the market can entertain a greater chance of a RBNZ rate cut within the next 12 months.

Key Quotes

“It is not ANZ’s view, but the odds are greater than the ~5% chance implied by current OIS pricing. Next week’s CPI figures could prove to be the catalyst to spark some action. What’s even more noteworthy is that the IRS curve is not entertaining the idea of cuts yet at all as positioning and lingering funding concerns make receivers hesitant. That is even with BKBM setting lower recently.”

“Liquidity is thin, making for a frustrating trading environment and it is hard to know what is going to shift sentiment, especially as funding pressures intensify in Australia again. We’ll be watching the NZDMO’s first tender of the 2029s this week. It represents $230k in DV01. We think demand will be reasonable (in part due to the recent stabilisation in the NZD) but the poor 2037s tender a few weeks ago makes us mindful.”