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New Zealand bonds close flat after RBNZ stays pat in monetary policy decision, forecasts rates to rise in Q2 2019

New Zealand government bonds ended Thursday’s session on a flat note after the Reserve Bank of New Zealand (RBNZ) remained pat in its monetary policy decision, unveiled late yesterday while maintaining forecasts for rate rises in Q2 2019.  

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained flat at 2.98 percent, the yield on 20-year also steadied at 3.49 percent while the yield on short-term 2-year slumped 2 basis points to 1.88 percent.

As expected, the RBNZ left the OCR unchanged and repeated its neutral guidance for the OCR outlook. However, the RBNZ’s thinking has become more dovish, with a downgrade to the inflation outlook. The RBNZ still expects to keep the OCR unchanged until around mid-2019, before gradually lifting interest rates.

"The RBNZ’s GDP forecasts still look too optimistic to us. We expect the recent plunge in business confidence combined with a housing market slowdown will lead to slower GDP growth in 2018 than the RBNZ expects. Consequently, we think the risks are tilted towards later OCR hikes than the RBNZ is currently planning," Westpac research commented in its latest report.

Meanwhile, the NZX 50 index fell 0.21 percent while close to 8,177.14, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bearish at -75.27 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest

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