RBNZ To Tighten, Deutsche Bank Says

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By Rudi Filapek-Vandyck

Investors in government bonds and currencies better take note as Deutsche Bank’s Fixed Income research team, fresh from their holiday break, have issued their first big call for the new year.

Deutsche Bank believes the Reserve Bank of New Zealand will tighten at its meeting on 25 January while the Reserve Bank of Australia is expected to remain on hold in February. If this scenario unfolds over the next few weeks the differential between the RBNZ and RBA cash rates will increase to 125 basis points.

There’s more to the story as Deutsche Bank believes the fact that the RBNZ will tighten further is likely to see the market price in a high probability of another rate hike in March. This, of course, will further widen the spread in terms of market pricing.

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