30 Day NZ Official Cash Rate

What is the 30 Day NZ Official Cash Rate?

Based on the Reserve Bank of New Zealand’s Target Official Cash Rate (OCR), the 30 Day NZ Official Cash Rate allows users with New Zealand interest rate exposure to manage their daily cash exposures as well as hedge against changes in the New Zealand Cash Rate. The New Zealand 30 Day Official Cash Rate Futures can also be traded outright.

Uses of 30 Day NZ Official Cash Rate

General uses include:

  • To hedge against movements in the New Zealand cash rate and manage daily cash exposures
  • Opportunities for arbitrage against related over the counter products like Overnight Index Swaps
  • Spread trading between different contract months
  • Spread trading opportunities between other interest rate products such as the New Zealand 90 Day Bank Bill futures contract
  • An excellent indicator of market expectations regarding possible future changes to the New Zealand Official Cash Rate

Risks of the 30 Day NZ Official Cash Rate

As with all government backed securities the risk with 30 Day NZ Official Cash Rate lies in the default risk of the New Zealand government. Fitch’s January 2016 rating of New Zealand’s domestic currency is AA+ with a stable outlook. If traded outright, the risks are simply that the position will move against the direction expected by the trader.

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