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RBNZ intervention evident - Westpac

FXStreet (Barcelona) - NZGB selling in August gave way to buying in September, according to our model of Westpac client flow.

Key Quotes:

“Domestic investors were buyers, as were offshore non-sovereigns, while sovereigns switched from being sellers to neutral”.

“Westpac’s flow data is generally consistent with the official RBNZ series but in August and September the correlations were negative. However this could simply be a case of transactions at month-beginning and -end not being treated identically by the RBNZ and Westpac processes”.

“Broadening our analysis to all NZ interest rate instruments, we observe a similar picture. The selling/paying during much of 2014 paused in September.”
“The first part of the month saw more pay flow, while the latter half saw the opposite, almost mimicking the movement in NZ swap yields”.

“The bid tone in September provides further evidence RBNZ intervention, or indeed NZD weakness, does not necessarily result in NZGB selling (as we posited in our weekly on 1 Oct). During September NZD/USD fell from 0.84 to 0.77, yet investors switched from being sellers to buyers”.

“Looking ahead, we would expect to again see NZGB buying in October if global yields remain under downward pressure”.

“Swap paying is likely to be subdued as corporate hedgers perceive no need to rush while this risk averse global climate persists, although there may be some speculative profit-taking”.

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