RBNZ to cut rates by 50bps at March meeting – TDS

Prashant Newnaha, Senior Asia-Pacific Rates Strategist at TD Securities (TDS) offers his take on the likely monetary policy decisions due to be announced by the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) in the coming months.

Key quotes:

“We update our Aus and NZ bond forecasts in the wake of recent central bank developments. Our Aus and NZ forecasts assume further foreign central bank action is likely as the virus outbreak escalates.

We expect the RBA to cut the cash rate to 0.25% next month (following the 25bps cut earlier this week). Our forecasts assume RBA QE from Q3. 10y ACGB yields should trough around 0.5% in Q3, risk is for lower ACGB yields.

We anticipate a 50bps RBNZ cut at the Mar meeting with another 25bps at its May meeting. We don't expect RBNZ QE, but markets will look to price in this potential. Our forecasts have 10yr NZGB yields hitting a low of 0.7%.”