AUDNZD sell on rallies now?
On Tuesday the RBNZ prompted a sharp spike higher in the NZ 10 year bond yields.
Why? The RBNZ are being asked to add housing prices to their remit. Eamonn had the answer at the time, that it decreases the chances of an RBNZ rate cut. The thinking is that if the RBNZ add house prices to their remit then the subsequent reduction in house prices will act as a form of monetary tightening. The subsequent result is that there will be less need for negative rates.
From here the RBA is focuses on keeping short term yields close to the OCR and that could leave AUD yields slightly below NZD yields until there is a dovish shift from the RBNZ. The last shifts from the RBNZ have been bullish. The start of the month had the OIS markets pricing in 40 bps of cuts by the end of 2021 compared to just 5 bps following the latest RBNZ communication.
