Latest / Best of Business / Remy Wisenberg: Milford Asset Management expert on the market reactions to the OCR staying in place

Transcript

Remy Wisenberg: Milford Asset Management expert on the market reactions to the OCR staying in place · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talk SEDB. Follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: Remy Weisenberg, Milford Asset Management High Remy Hi Heather. So
• 0:20
  Speaker 2: what were the markets expecting going into today?
• 0:24
  Speaker 3: Yes, so the markets were actually near to fully pricing
• 0:27
  Speaker 3: in the hold for today, which is what happened. But
• 0:31
  Speaker 3: as you said, there has been a divergence of views,
• 0:34
  Speaker 3: and especially on the forward outlook. We've had concerns over
• 0:38
  Speaker 3: rising inflation due to that ongoing Middle East conflict and
• 0:41
  Speaker 3: New Zealand inflation is already relatively high, so that was
• 0:44
  Speaker 3: sitting around three percent last quarter. But at the same
• 0:47
  Speaker 3: time we've actually had other economic data points, so unemployment,
• 0:51
  Speaker 3: consumer business confidence. They're pointing to softness in the economy. Now,
• 0:56
  Speaker 3: the rbn said they have a single mandate which has
• 0:59
  Speaker 3: focused on keeping inflation within a target range of one
• 1:02
  Speaker 3: to three percent over the medium term. Now that's made
• 1:05
  Speaker 3: it very difficult for markets and economist action to have
• 1:09
  Speaker 3: a really firm view on what the RBNZ should do
• 1:12
  Speaker 3: and where the ocr will ultimately end up. So going
• 1:15
  Speaker 3: into today, we did see the market pricing in nearly
• 1:19
  Speaker 3: three hikes before the end of the year. Now that
• 1:22
  Speaker 3: was actually slightly above the RB and z's previously communicated track.
• 1:26
  Speaker 2: Okay, so how did the market react then to today's announcement.
• 1:30
  Speaker 3: Yeah, so we did get the updated track from the
• 1:33
  Speaker 3: RB and Z today in the announcement, and that did
• 1:36
  Speaker 3: suggest roughly two to three hikes this year, so that
• 1:39
  Speaker 3: brought it roughly in line to what the market had
• 1:42
  Speaker 3: already been expecting. But what we did see was that
• 1:45
  Speaker 3: the track indicated a relatively strong chance of an increase
• 1:49
  Speaker 3: in the OCR in the third quarter, potentially as soon
• 1:52
  Speaker 3: as July. And it's also worth noting that three of
• 1:55
  Speaker 3: the six committees, three of the six committee members voted
• 1:59
  Speaker 3: to increase the OCR today, so that really enforced that
• 2:03
  Speaker 3: upward trajectory of the OCR, and as a result, we
• 2:07
  Speaker 3: actually saw the market bring forward some of its rate
• 2:09
  Speaker 3: high expectations from later in the year. So what we
• 2:13
  Speaker 3: saw initially was the Kiwi dollar that bounced up higher
• 2:16
  Speaker 3: against the US dollar and the Aussie dollar. We also
• 2:19
  Speaker 3: saw a little bit of movement in interest rate swaps,
• 2:22
  Speaker 3: so at the shorter end, the two year swap rates,
• 2:25
  Speaker 3: they were up around five basis points, while the longer end,
• 2:28
  Speaker 3: the ten year that was actually down a touch, but
• 2:32
  Speaker 3: as we know, there was a lot of uncertainty around
• 2:34
  Speaker 3: the Middle East and how the economy might respond, So
• 2:37
  Speaker 3: I think the RB and Z and markets will need
• 2:39
  Speaker 3: to remain.
• 2:40
  Speaker 2: Fluid now on that and obviously the talk of a
• 2:43
  Speaker 2: possible peace deal. How the market's reacting to that.
• 2:47
  Speaker 3: Yeah, so overnight the US ten year treasury rate that
• 2:51
  Speaker 3: actually came down a little bit, so that was potentially
• 2:54
  Speaker 3: on hopes of that peace steal, but it does continue
• 2:56
  Speaker 3: to sit higher than where it was pre conflict. Now,
• 2:59
  Speaker 3: global equity market, as we know, they've been bouncing around
• 3:03
  Speaker 3: a lot based on the news flow. But the S
• 3:05
  Speaker 3: and P five hundred that actually hit a new record
• 3:07
  Speaker 3: height again. Now, some of that could be optimism of
• 3:11
  Speaker 3: the conflict resolution. Some of that might also be some
• 3:14
  Speaker 3: of the catch up from the long weekend over the US,
• 3:18
  Speaker 3: but ultimately the fact that we are still seeing new
• 3:20
  Speaker 3: highs really shows the strength of the global equity markets
• 3:25
  Speaker 3: and they continue to be popped up by the strong
• 3:27
  Speaker 3: demand for AI and also really solid earnings growth from
• 3:30
  Speaker 3: some of those large US companies. But never say never,
• 3:34
  Speaker 3: because we haven't seen a firm resolution yet, so things
• 3:38
  Speaker 3: move around by the day, and we do continue to
• 3:41
  Speaker 3: see volatility across the markets. I think until there is
• 3:44
  Speaker 3: a resolution.
• 3:45
  Speaker 2: Very good advice, Remy, I really appreciate it. Remy Weisenberg,
• 3:48
  Speaker 2: Milford Asset Management.
• 3:50
  Speaker 1: For more from News Talks at b listen live on
• 3:53
  Speaker 1: air or online, and keep our shows with you wherever
• 3:56
  Speaker 1: you go with our podcasts on iHeartRadio