New Zealand bonds close higher as Fed July minutes raise doubts over next rate hike

The New Zealand bonds closed higher Thursday as Federal Reserve July meeting minutes increase doubts over rate hike this year.

The yield on the benchmark 10-year bond fell 1-1/2 basis points to 2.160 percent and the yield on 7-year note ended 1-1/2 basis points lower at 1.885 percent and the yield on short-term 2-year note slid 1/2 basis point to 1.765 percent.

Minutes from the 26 – 27 July FOMC meeting indicated that FOMC officials were split on whether a rate hike was needed soon. Overall, many judged that it was appropriate to wait for additional information that would allow them to evaluate the underlying momentum in economic activity and the labour market and whether inflation was continuing to rise gradually to 2 percent as expected.

However, several participants suggested there would likely be ample time to react if inflation rose more quickly than they currently anticipated, and they preferred to defer another increase in the federal funds rate until they were more confident that inflation was moving closer to 2 percent on a sustained basis.

On balance, participants generally indicated that their economic forecasts had changed little over the intermeeting period, continuing to anticipate that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labour market indicators would strengthen.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 30.10 points to 7,385.12.