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Swift market reaction as RBNZ calls time on money printing

The Reserve Bank of New Zealand surprised the market today with an announcement it will end its bond buying programme within the next 10 days.

Wednesday, July 14th 2021, 6:21PM

by BusinessDesk

Currency and bond traders reacted immediately, pushing interest rate swaps and the NZ dollar higher. 

Kiwibank chief economist Jarrod Kerr said interest rate swaps jumped 8 to 10 basis points with “more upside in rates to come”.

The yield on a 10-year government bond lifted more than 7 basis points, with similar movements across the yield curve. ANZ chief economist Sharon Zollner said the market was now pricing a 50% chance of an official cash rate hike next month.

The kiwi jumped half a cent from 69.64 US cents before the 2pm release to peak at 70.22 US cents afterwards.

Equity markets saw a more muted reaction with the benchmark index declining half a percent as share prices retreated on the prospect of higher interest rates. 

The S&P/NZX 50 Index fell 65.26 points, or 0.5%, to 12,719.68. Turnover was $207 million.

Offshore markets set the tone for this decline after inflation data in the United States prompted fixed interest rate traders to bring forward expectations of rate hikes in America.

“Stock market sentiment has soured on signs earlier rate hikes might be necessary,” said ASB economist Mike Jones. 

NZ’s market had already priced in a 25% chance of rate hikes at the RBNZ’s next meeting in August, but that possibility is now considered twice as likely after the abrupt end to bond buying.

Dual-listed Australian banks' shares prices declined after the announcement.

Westpac Bank dropped 1.6% to $26.82, ANZ Bank fell 1.8% to $29.39, and boutique lender Heartland Group was down 2% at $1.51.

The majority of stocks on the index fell, led by Vista Group International, which slipped 3% to $2.23.

Property and utility stocks were among the weakest on the day. Precinct Properties declined 2.9% at $1.68, Contact Energy fell 2.5% to $8.19, and Investore Property was down 2.4% at $2.00.

Travel booking firm Serko posted the day’s biggest gain, up 2.4% at $7.31.

In currency, the trade-weighted index was at 74.07 at 3pm, from 74.01 yesterday.

The kiwi traded at 93.73 Australian cents from 93.47 cents, 77.24 yen from 77.29 yen, 59.33 euro cents from 59.00 cents, 50.59 British pence from 50.41 pence, and 4.5263 Chinese yuan from 4.5285 yuan.

Tags: Market Close

« My Food Bag buoyed by Aussie takeoverKiwi dollar hangs onto gains after RBNZ boost »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.85 3.25 3.55
ANZ 4.44 ▲3.39 ▲3.85 ▲4.09
ANZ Blueprint to Build 1.68 - - -
ANZ Special - ▲2.79 ▲3.25 ▲3.49
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.85 3.25 3.55
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.85 3.25 3.55
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 4.55 3.45 3.85 4.15
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.25 1.85 2.35 2.65
Heretaunga Building Society 4.99 3.80 3.90 -
Lender Flt 1yr 2yr 3yr
HSBC Premier 4.49 2.19 2.45 2.69
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 ▲2.45 ▲2.85 ▲3.15
Kainga Ora 4.43 2.88 3.28 3.59
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 ▲3.80 ▲4.00 4.34
Kiwibank - Offset 3.75 - - -
Kiwibank Special 3.75 ▲2.95 ▲3.15 3.49
Liberty 5.69 - - -
Nelson Building Society 4.95 2.99 3.24 -
Lender Flt 1yr 2yr 3yr
Pepper Essential 4.79 - - -
Resimac 3.39 2.98 2.79 3.29
SBS Bank 4.54 2.99 3.39 3.59
SBS Bank Special - 2.49 2.89 3.09
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - ▲2.65 - -
The Co-operative Bank - Owner Occ 4.40 ▲2.85 ▲3.25 ▲3.49
The Co-operative Bank - Standard 4.40 ▲3.35 ▲3.75 ▲3.99
TSB Bank 5.34 3.35 3.75 4.05
TSB Special 4.54 2.55 2.95 3.25
Wairarapa Building Society 4.99 3.55 3.49 -
Lender Flt 1yr 2yr 3yr
Westpac 4.59 3.45 3.85 4.09
Westpac - Offset 4.59 - - -
Westpac Special - 2.85 3.25 3.49
Median 4.54 2.95 3.25 3.49

Last updated: 29 September 2021 8:51am

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