OCR 11 June

What will the RBNZ do with the OCR on 11 June?

Ah if only we knew that we could make some money, tbh its too far away, slightly more likely for the 25c cut atm. Although with recent RBA announcement, possibly no change will occur.



Edited 1 time(s). Last edit at 05/06/2009 05:10PM by Eclipse.

no change is looking more likely after the latest unemployment data.

Market has moved to price in virtual no chance of cut

If a cut is being priced out then that should theoretically mean INT.JUN09.60 is way overpriced at 58cents.

Hold the phone:

"Statistics New Zealand (SNZ) said today the 2.9 percent fall in the sales volumes was double the previous largest falls of 1.4 percent seen in March 1997 and last June."

"The value of total retail sales for the March quarter fell a seasonally adjusted 1.5 percent or $236m.

That was the fourth consecutive quarterly fall, and the largest since March 1997, when the value of sales fell 1.6 percent, SNZ said."

[www.stuff.co.nz]



Edited 1 time(s). Last edit at 05/15/2009 11:39AM by ltgorman.

JP Morgan are now predicting a cut of "only" 25 basis points, but see a real chance of something more: [www.scoop.co.nz]

Any gloss on what explains the bizarre moves in these stocks this afternoon?

Looking at the charts, I'd say someone took a fairly hefty punt on OCR.25 at about 3:30pm, but forgot to short OCR.NC. Some arbitrageur then stepped in, and made a quick and dirty $80 or so as the prices returned to where they were.

FWIW three weeks out from the next RBNZ meeting...markets close 21/5 pricing 7bps of easing for 11 June meeting and cumulative total of 14bps by September meeting. Pricing down today after inward migration hit a 5-yr high and US Libor-OIS spreads fell for the 36th session in a row to fresh 15mth lows. Markets have 6bps of retightening priced in for the December meeting. Thus markets now more-or-less saying the OCR will remain at current levels for the rest of the year. Next week's Budget/NBNZ business survey (both Thursday) the last major events on the local calendar, RBA expected to again leave rates unchanged in Australia in early June (just 5bps of easing priced today). Business survey and labour market data due in the US over the next three weeks.

My question is..... what is Economists pick?

Still plumping for a 25bp cut, which is in line with most economists' predictions (9 out of 15, five no change, one picking -50bp). The last poll result I have is at Wednesday last week - before the horror retail result.

It's a close call, but I think the fact that retail interest rates haven't done much after their last cut might will be irking the RB. Inflation is not a problem, and despite talk of "green shoots" among analysts, we're still seeing some ugly international growth numbers that will concern the Bank. Plus with the dollar at US61c, the cushion to exporters is nowhere near as good as it was back in Feb at US50c.

All in all, my view is that Bollard is scared of recession and his predilection is to cut rather than not - especially given that there's no evidence of any stabilisation in household spending yet.

Mkt update - As of 25/5 now only 7bps of easing priced in for 11 June and only 11bps priced in total anywhere in the curve so for the first time it seems the mkt has concluded that the RBNZ's easing cycle is over. I noticed today that Westpac joined the banks calling for no change in rates on 11 June. I haven't seen any comment from BNZ but they may now be the only major local-based bank still calling a cut on 11 June (ANZ/National, ASB, Goldman-Sachs, Deutsche Bank and now Westpac all on no change).

Just noticed this out today as well.

“The New Zealand Roy Morgan Consumer Confidence Rating is up 1.8pts to 105.8 — its highest in 2009, and the highest it has been since the bankruptcy of Lehman Brothers in mid-September 2008 plunged global financial markets into a period of unprecedented uncertainty.

“The recovery in the NZ Roy Morgan Consumer Confidence Rating in recent months (up 12.4 points since mid March 2009) has been driven by increasing confidence about the New Zealand economy - the low 2.5% interest rates set by the Reserve Bank of New Zealand are helping support the economy.

“Now 54% (up 11% since mid-March) of New Zealanders expect ‘good times’ for the
country over the next five years and 29% (up 8% since mid-March) expect ‘good times’ for the economy over the next 12 months.”

[www.roymorgan.com]

[www.iii.co.uk]

"The quarterly survey of expectations on behalf of the Reserve Bank of New Zealand (RBNZ) showed that monetary conditions were perceived as being tighter than neutral by a small majority of respondents.
Nine of the 15 economists in a Reuters poll expect the central bank to cut rates by 25 basis points at its next meeting on June 11."

Markets vs economists part 2....Anyones guess really!

Yes economists were right last time, im with them. Im still not convinced that all is well.

With a terrible payout forecast by Fonterra i am surprised that 25 pt cut actually went down. Bad new for the economy. When Fonterra announced a big increase in payout 2007 RBNZ lifted by 25 and sited this as a reason. Is the reverse not the same?? NC seems over priced anyway

corbusian Wrote:
-------------------------------------------------------
Nine of the 15 economists in a Reuters poll expect
the central bank to cut rates by 25 basis points
at its next meeting on June 11."

The Reuters poll is a little old now... with ASB and Westpac switching to no change in the last week, it's now 7/15 at most.

top_shot Wrote:
-------------------------------------------------------
> With a terrible payout forecast by Fonterra i am
> surprised that 25 pt cut actually went down. Bad
> new for the economy. When Fonterra announced a
> big increase in payout 2007 RBNZ lifted by 25 and
> sited this as a reason. Is the reverse not the
> same?? NC seems over priced anyway

The difference this time is that the RBNZ was already anticpating something like this. In March they were talking about milk powder prices falling another 20% this year because of the EU subsidies (which as yet hasn't panned out).

10 of 16 picking a 25bps cut.

Ltgorman - Whats your source? can only find news supporting nc

[www.reuters.com]

I saw that article from that well known source.
news.alibaba.com

has the source listed at the bottom as reuters but couldn't find anything on reuters to corroborate it.
As corbusian has pointed out and the only recent article I can find points to no change.

Yeah i read the Alibaba one, assumed it was sourced correctly. But cant find anything on Reuters either. Was posting from my iphone so didnt check it out properly.

This source refers to the Reuters survey, too: [www.scoop.co.nz]

I wouldn't be surprised by another small cut, especially to keep the dollar down.

Weird that Reuters dont report it then!
Scoop might have just picked up on the Alibaba article .. who knows

I don't know how seriously these are taken or if they have any influence:

[www.scoop.co.nz]

Quote

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during May 2009, shows total sales in April 2009 decreased 59% (export sales decreased by 53% with domestic sales down 62%) on April 2008.

The NZMEA survey sample this month covered NZ$423m in annualised sales, with an export content of 42%.

Net confidence slipped to -50, down from the -42 result reported last month.[\QUOTE]



Edited 1 time(s). Last edit at 06/05/2009 12:04PM by ltgorman.

Mounting evidence that the US economy is past the worst.

Payrolls fell much less than expected

Growing speculation that the Fed could hike rates this year

Credit markets healing nicely

I don't think its past the worst.

The births and deaths model the Bureau of Labor Statistics uses managed to add 220,000 jobs to the raw figures.

As an example 77,000 of these "jobs" came from the Leisure and Hospitality sector. But you should also consider hotel occupancy is down 11% on the same time last year.

[www.calculatedriskblog.com]


The U6 unemployment figure is at 16.4%

Which makes more sense when something like 1 in 9 Americans are using food stamps.

On top of this, the fudged 9.4% figure is already worse than the most adverse unemployment scenario for Q2 2009 used in the banking stress tests.


The Fed hiking rates will only increase mortgage rates and put more pressure on households and the real estate market.

The most important US labour market data out last week was Thursday's jobless claims data - a benefit count. Initial claims for new benefits (the flow) peaked in February and last week continuing claims (the stock) fell for the first time since the turn of the year (which was likely thrown out by the holiday). In the early 80s recession the claims data behaved exactly as they are at the moment - a year later the official unemployment rate had fallen 2pps. I've got an open mind on the US. As the RBA's Governor said this week, the policy response to the downturn has been has extraordinary as the downturn itself. That's why the RBA is presently on hold. It remains to be seen this week whether our central bank is coming around to this view also.

Do you prefer blue nose or red nose US media clowns?

LOLfed

___

It is difficult to predict, especially others' predictions.



Edited 2 time(s). Last edit at 06/07/2009 05:21PM by dutching.