RBNZ OCR 12 March Stocks

Sorry! Colourblind. Actually quite happy now that I've rediscovered the correct meaning of + and -. Oops!

Public service announcement: never trade while sleep deprived.

The knee jerk reaction against .75bps and in favour of 25bps & 50bps maybe overdone... though looks like 100 is out of the picture
[www.nzherald.co.nz]

Yea I agree. Most experts are picking a 75 point drop so I have no doubt that it will climb back up.

ANZ-National have this morning changed their view to a 50bps cut from a 75bps cut...

BNZ now calling 50bps too, they were 75bps.

Yea, could be either 50pbs or 75bps, however I wouldn't rule out the 25bps yet.

I'm also choosing between 25 or 50. Leaning towards 25, as I believe Bollard wont want to go too much faster with rate drops and can make a further cut again at next meeting. This way our dollar should regain some strength with slower rate drops. A cut of 50 could see the dollar dropping at too fast a rate.

I reckon there's a fairly easy 25% return buying equal amounts of OCR.25, OCR.50, and OCR.75. My tea-leaf reading isn't very sensitive, so that's where I'm at.

I'm also shorting OCR.100; I'd short it way more, but I'm maxed out. (There's a couple of big buy orders—$155 worth of easy money—at about 20c.)

This leaves me exposed to no-change (OCR.OTHER), but it's a cheap hedge.

OCR.OTHER should be at 0...there is zero chance of a pause or 125bp+ move.

I totally agree i'm shorting OCR.OTHER and OCR.100 like there's no tomorrow and they both still sit up surprisingly high. Even with Aussie's GDP shocker and subsequent AU rate cut to come there's no way the RBNZ will cut too big for fear of pushing interest rate differentials too far. Just how ballsy the RB is will come out next Thursday, I wouldn't be surprised to see a 75 point move if it weren't such an odd number, so I'm long both 50s and 75s.

At the end of the day interest rates are low enough to stimulate investment, its other factors holding the economy back, I think the RBA were the first to step back and say "lets see how things flow" just because everyone is slashing rates doesn't mean its working. Getting banks to lend to each other and provide liquidity will get lending back up and some assurance into the economy, until then no amount of rate cutting will get anyone to start planning long term.

A recent survey of 11 economists done by GoodReturns.co.nz showed that four are now expecting a 50 basis point cut, three a 75 point cut and four a 100 point cut to 2.50%.

The survey is out of data...a dow jones market survey conducted and released yesterday now has median market economist expectations of a 50bp cut...and today the Dow is up 230 and Auckland real estate agent Barfoot and Thompson is reporting a rise in house sales in February (stronger than January for the first time in 4 years) and prices higher than they were last year. It's 50bps, 75bps at tops.

I'm picking 50 points, with 25 points second choice. I'm ruling out 75 and 100 for now as that'd be too damaging to move that fast considering the RBA had no change, they can always drop again at next meeting if needed.

I do think 50 points is priced about right for now, 25 is a bit low considering it does have a chance based on the RBA's lack of action.

Fwiw financial markets continuing to price out easing this morning, now down to about 63bps priced in for the meeting. The 100bp option is now off the table after the better housing data released this morning and fonterra's improved milkpowder auction yesterday.

Apparently some economists still believe a 100bps cut is on the cards. This is the latest economic release from ASB (today):

"We expect the RBNZ to cut the OCR by 100 basis points at the March MPS, on the back of further deterioration in the global economic outlook. Forecasts for global growth continue to be revised down and ongoing pessimistic data point to further downside risk. Offshore financial systems remain weak, with US authorities still struggling with bail out plans for the banking system, whilst vulnerabilities in the European system have recently come to light. At home, the economic outlook also continues to deteriorate, with NZ set for some sizable falls in GDP over the next few quarters. Compared to Australia, monetary policy is less immediately potent and fiscal stimulus more constrained, pointing to the need for lower interest rates.
There is a risk that the RBNZ may opt for a smaller OCR cut, with the consensus among economists split between a 50 basis point cut and a 100 basis point cut. Market pricing is half way between 50 and 75 basis points. If the RBNZ does cut by less than we expect, then future OCR cuts are likely to more drawn out. We remain convinced that a 2.0% cash rate is appropriate for New Zealand."

They must be on there own.. expectations have eased considerably..

[www.scoop.co.nz]

I think they're high

Actually, contrary to the ASB's view, the global fundamentals have not deteriorated further - it's just that some people are still catching up with what has been obvious for some time. And of course the economic news - including likely negative GDP over the first half of this year at least - is why interest rates have been reduced to such low levels in the first place, including the 150bp cut in late January. Nothing that the RBNZ or Govt does will improve the dataflow over the next few months so we had better all get used to that. But with the amount of monetary and fiscal policy easing now in the pipeline we can hopefully all look forward to a better 2010. We just need to be patient i'm afraid.

For what it is worth the NZ financial markets closed today with 62bps of easing priced for the 12 March meeting.

100 is still trading so high too.... unless it's Mr Bollard buying up stocks

“I found it a real pig of a thing to work"

-- Mr. Bollard on New Zealand is the first country to celebrate UN Water Day in 2009.

The Moniac

The OCR should drop by at least 50bp and a max of 100bp. I think it will drop by 75bp because it's in the middle.

100bp is going up and up.

If you take a look across all the contracts in the last couple of hours there has been some strange goings on - somebody trying to jam them all over the place - take a look at the "other" contract for example!

carrots98 Wrote:
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> 100bp is going up and up.

"Thanks Gosh it is Friday!"
-- The Moniac's Plumber.

A bizarre afternoon for these stocks on Ipredict but the real financial markets have closed little changed from yesterday with about 64bps of easing priced for next week. The most up to date survey of bank economist expectations implies the following probabilities

-25bps 10%
-50bps 45%
-75bps 25%
-100bps 10%
Other 10%

Given that, the prices prevailing before this afternoon's activities weren't too far out of line but they are a bit out of line just at the moment with still too much weight on the 100bps and not enough on the 50s (maybe after the ASB pick got some coverage in the media - even though that bank has picked only 1 of the last 5 meetings correctly....).

This afternoon's shenanigans look like speculation in favour of a 100 basis point cut, followed by some arbitrage.

iPredict says a cut between 25 and 75 basis points is 12% less likely than it was this time last night. I can't think of any particular events that lead to this conclusion. I'm still betting against a 100 basis point cut, but finding it slightly harder to hold my nerve.

these OCR stocks are the devil. dont trust economists

Are the earlier cuts working,or are people and business, waiteing for the next big cut?, Isnt there a danger in that. Maybe it will go to around 3ish,and give it a chance to kick in, and see some activity in the economy.

Latest opinions out today...

[www.bloomberg.com]

..Policy makers will lower the 3.5 percent official cash rate by 0.75 percentage point on March 12, according to the median forecast of 11 economists surveyed by Bloomberg News...