RBNZ: Market under-prices the chance the second cut will come as soon as February - BNZ

Research Team at BNZ, thinks that the market under-prices the chance the RBNZ’s second cut will come as soon as February.

Key Quotes

“Currently February OIS is priced around 1.65%. We look to receive. However, a better opportunity may arise after the 15 Sept Q2 GDP release (where we see upside risk), or 22 Sept OCR review (where we expect the Bank to leave the OCR unchanged), and ahead of the 18 Oct Q3 CPI release.

We see Q3 CPI printing at -0.1%y/y (RBNZ had 0.1% in its August MPS). The market may promptly respond to ‘deflation’ headlines. We also look for opportunities to receive 2-year swap. On a move back above 2.0% we would position for a new low toward 1.80%.”