Daily outlook for NZ rates

Westpac Research notes:

NZ swap yields 1 day: Given the movement in interest rates in key markets overnight, the NZ 2yr should open unchanged  at 3.19% while the 10yr should open up 1bp at 4.04%. Dairy prices, which the RBNZ last week flagged as a major factor in monetary policy thinking, last night were unchanged and thus gave the market no reason to reprice OCR expectations.

NZ swap yields 1-3 month: Short maturity NZ interest rates should fall further during the next few months. The RBNZ has started a fresh easing phase, which could be worth more than 50bp if dairy prices continue to fall. We target a low in the 2yr of at 3.10% or lower. The 10yr yield will continue to be hostage to expectations of Fed policy, but assuming normalisation starts in September, we target at least 4.30%.