BONDS: Bull-Steepener After RBNZ Cuts By 50bp

NZGBs closed 4-7bps richer after the RBNZ cut 50bps to 2.50%. 

• The MPC discussed cutting the OCR by 25bp or 50bp and all members agreed the latter was appropriate given material spare capacity in the economy. Given that this is likely to persist for some time and that while the economy has begun to recover it remains lacklustre, further cuts bringing policy into stimulatory territory are likely. In line with this it said that “the Committee remains open to further reductions in the OCR”.
• The MPC’s inflation concern appeared to shift this month. In August, it said it could ease policy further “if medium-term inflation pressures continued to ease as expected”, whereas this month it seemed more concerned with undershooting the target mid-point, stating it “remains open to further reductions … for inflation to settle sustainably” near the 2% mid-point over the medium-term.
• Swap rates closed 4-6bps lower on the day.
• RBNZ dated OIS pricing closed 9-15bps softer across meetings. 34bps of easing had been priced for this meeting. A cumulative 62bps of easing had been priced by November 2025 versus 75bps now (including today’s move).
• Tomorrow, the local calendar will see the NZ Government 12-Month Financial Statements.
• The NZ Treasury also plans to sell NZ$275mn of the 1.50% May-31 bond and NZ$175mn of the 4.25% May-34 bond.