AUSSIE BONDS: Holding Negative On A Data-Light Session

NZGBs gap 9-12bps richer after the RBNZ cut the OCR by 25bps to 3.0%, as expected (4–2 vote; some favoured a 50bp cut).

• Forward guidance sees the OCR averaging 2.71% in 4Q 2025, 2.56% in 2Q 2026, and 2.59% in 3Q 2026 (down from May’s trough forecast of 2.9%). Indicates scope for further rate cuts if inflation pressures ease; forecasts imply a good chance of two more 25bp cuts.
• GDP seen contracting 0.3% q/q in 2Q 2025 but growing 0.3% q/q in 3Q 2025. Risks to the outlook remain both to the upside and downside.
• Bottom line: RBNZ delivered a widely expected rate cut to 3%, signalled a lower future OCR path, and left the door open for further easing if inflation moderates. Markets responded with a weaker NZD and higher local equities.
• Swap rates are 9-12bps lower after the decision.
• RBNZ dated OIS pricing has shunted softer for meetings beyond August. Pricing is 14-18bps softer out to July 2026. 31bps of cumulative easing is priced by November 2025. 

With policy makers signaling there is scope to lower borrowing costs further if inflation pressure ease the NZD/USD has quickly moved lower and is now testing some pivotal support. Is this enough for the NZD to break lower and reignite the momentum lower ? Together with a market that is paring back USD shorts into Jackson Hole it does leave the NZD vulnerable.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

• RBNZ SEES LOWER OCR SHOULD INFLATION EASE FURTHER
• RBNZ DISCUSSED 50BP CUT, ALONGSIDE HOLD AND 25BP REDUCTION