- New Zealand’s benchmark Treasury yields rise, stocks fall on RBNZ-inspired move.
- The RBNZ matched market forecasts by announcing a 0.75% rate hike and revealed recession fears.
- NZ 10-year government bond yields renewed a weekly high, the NZX 50 fell 0.70% on the day.
- RBNZ Governor Adrian Orr’s speech will be important for fresh tracks.
New Zealand (NZ) markets are portraying a sharp reaction to the Reserve Bank of New Zealand’s (RBNZ) interest rate decision early Wednesday morning.
This means the RBNZ matched market forecasts and announced a 75 basis point (bps) rate hike during its updates to deliver a tenth rate hike. However, it should be noted that unfavorable economic forecasts pointing to a recession in 2023 and New Zealand Finance Minister Grant Robertson’s sour comments that a recession is on the horizon also played a role.
Reflecting these moves, New Zealand 10-year government bond yields jumped 3.87% to 4.30% on the day, while New Zealand’s benchmark NZX50 share index fell 0.70% on the day.
In addition to the actual rate hike of 75 basis points, the 10th in a row, statements from the monetary policy report indicating that policymakers were also considering a 100 basis point rate hike before announcing the latest move appeared to paint a starkly hawkish move from by the RBNZ. The RBNZ is on the same line forecast official cash rate (OCR) peak of 5.5% compared to the current level of 4.25%.
This means Auckland traders are likely to see further stock liquidation as well as a rush towards kiwi denial. bonds, before the key activity numbers and minutes of the Federal Open Market Committee (FOMC) meeting. It should be noted that RBNZ Governor Adrian Orr’s press conference will be closely watched for immediate guidance as traders look for further clues to support the latest hawk.