In spite of the Reserve Bank raising interest rates, banks haven't increased the interest they pay investors in term deposits.
AMP expects the central bank to announce a rate hike next week, and sees the official cash rate (OCR) eventually hitting 5 percent.
But the head of fixed income at AMP Capital, Grant Hassell, says banks probably won't lift their deposit rates until next year.
"It must be a bit frustrating for investors seeing the official cash rate go up - by around 100 basis points by the end of next week - and yet their term deposit rates haven't gone up at all.
"And the reason for that is, the banks are flush with cash - they don't really need the money because credit growth in New Zealand is rather benign.
"So until credit growth picks up, which we don't expect to be occurring until early into next year, term deposits really are not going to budge."
Although this country is attractive to offshore investors because of its high yields, he said, that could change dramatically should the New Zealand dollar fall.
Mr Hassall says New Zealand bond yields have been attracting a lot of offshore interest for two reasons.
"One is they get a very high interest rate - a high yield - and they also get protection. So if the equity markets turn down, bond yields will go down more in New Zealand potentially than in offshore markets - so they get a double benefit."
But he says both of those things will reverse when the New Zealand dollar falls.
"The Reserve Bank may have to raise the OCR quicker, which will put upward pressure on bond yields.
"So investors potentially will end up with a currency loss and a capital loss on their fixed income investments."
Mr Hassall said there was sometimes a "very small door" to get in and out of New Zealand markets.
