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Developments in New Zealand’s overnight indexed swaps market

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New Zealand-dollar denominated Overnight Indexed Swaps (OIS) have been traded for just over a decade. Characteristics unique to OIS make them an ideal financial market instrument with which to hedge against a change in the Reserve Bank’s Official Cash Rate. Market participants tend to use OIS to hedge against short-term interest rate risk, or to speculate on the direction of monetary policy. As a result, the Reserve Bank uses OIS prices to gauge market expectations of future monetary policy decisions. Our analysis suggests that market-implied expectations are an unbiased predictor of the Official Cash Rate for all forecast horizons out to six months.

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  • Raiko Shareef, 2013. "Developments in New Zealand’s overnight indexed swaps market," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 76, pages 25-33, March.
    • Handle: RePEc:nzb:nzbbul:mar2013:04
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2013mar76-1shareef.pdf
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    Cited by:

    1. Andrew Kendall, 2017. "Developments in financial market benchmarks," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 80, pages 1-17, June.
    2. Lloyd, S. P., 2017. "Overnight Indexed Swap Market-Based Measures of Monetary Policy Expectations," Cambridge Working Papers in Economics 1733, Faculty of Economics, University of Cambridge.
    3. Lloyd, Simon P., 2021. "Overnight indexed swap-implied interest rate expectations," Finance Research Letters, Elsevier, vol. 38(C).

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