Research Team at BNZ, suggests that after the RBNZ’s surprise cut recently the market now prices a further 0.25% OCR cut by August and around a 30% chance that rates need to be cut even further. Key Quotes “We anticipate a cut to 2.00% in June, but concur with the view that risks are tilted toward the OCR ultimately being cut below 2.00%. We anticipate that NZ short-end yields will trade lower near-term. We look to receive 2- year swap above 2.30%, looking for an exit at 2.10%. We also anticipate that NZ-AU 2-year swap spreads trade into negative territory as the year progresses. We are waiting for the NZ 1-3s curve to fall to flat before positioning for steepening. We still see US long-yields dragging NZ equivalents higher by year-end. We see the NZ 2-10s swap curve to break above its long-held range to trade above 125bps. Fundamentals continue to support demand for NZGBs. We see 10-year NZGBs outperforming USTs and ACGBs to year-end.” For more information, read our latest forex news.