New Zealand bonds close higher as investors risk appetite fade post 6.2 magnitude earthquake

The New Zealand government bonds closed higher Tuesday as investors' risk appetite faded after reports of a 6.3 magnitude earthquake off the North Island.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2 basis points to 3 percent, the yield on 7-year note also ended 2 basis points lower to 2.73 percent and the yield on short-term 2-year note slid 2 basis points to 2.09 percent.

New Zealand one again hit by a powerful earthquake of 6.3 magnitudes off the North Island. The epicentre was 193KM northeast of the capital Wellington, according to the U.S. Geological Survey. Last week, the New Zealand has been struck by a powerful 7.5 magnitude earthquake with its epicentre located on the east coast of the country’s South Island.

Further, the earthquake will disrupt business activity in the short term, but in most parts of the country activity is likely to return to normal in a matter of days. Also, the negative impact on consumer confidence and tourism numbers could last slightly longer, especially if (as seismologists expect) aftershocks continue in coming months.

Moreover, the Reserve Bank of New Zealand in its November monetary policy meeting released on November 10, lowered the official cash rate (OCR) once again by 25 basis points, after easing in August, a move taken for the seventh time since June 2015, in an attempt to boost the slow-moving economy.

However, developments over the past few months have been positive for the New Zealand economy, and the downside risks to the RBNZ’s view have diminished. We expect that the OCR will remain on hold for an extended period. However, longer term rates look set to rise from here.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed down 32.56 points to 6,816.39. While at 05:00 GMT, the FxWirePro's Hourly New Zealand Dollar Strength Index stood neutral at +49.01 (higher than +75 represent a bullish trend).