FXstreet.com (Barcelona) - The NZ Official Cash Rate (
) will remain unchanged for most of the year ahead. Despite this,
we anticipate that market expectations regarding the OCR will wax
and wane, as they have over the past year. "Our forecasts for
short-end yields to be largely range-bound in H1 2013, reflects
this view - the premise is that markets move between pricing up to
30bps of RBNZ rate cuts and 10bps of rate hikes in the subsequent
12 months. For 2-year swap, this represents a 2.50%-2.90% range."
writes Kymberly Martin, a Strategist at BNZ.
In addition, "The bottom of this range will be tested during
periods when perceptions of global risk rise, when markets
extrapolate RBA rate cuts across the Tasman, or when NZ data is
underwhelming." she adds. For example, we expect the releases of
Q4-12 and Q1-13 CPI data to remain not far from the bottom (1%) of
the RBNZ's target range (remembering the new Policy Targets
Agreement specifically now targets the 2% mid-point of this range).
These dips in yields may present opportunities for those looking to
undertake some hedging activity.
Short-end (1-3-year) swap yields are currently 'fair' based on the
OCR track implied by the RBNZ's 90-day bank bill track published in
its December MPS. Our own forecasts only diverge from the RBNZ's
from the end of 2013. According to Martin, "This partly reflects
our higher CPI forecasts from this point. We see a first OCR hike
in December in 2013. We expect the cash rate to move progressively
back towards neutral reaching 4.25% by end 2014."