New Zealand bonds close higher following weak US session, RBNZ policy decision in focus

The New Zealand bonds closed higher Friday as markets took their cues from yesterday’s weak U.S. session following a drop in the U.S. 10-year treasury yields to a one-month low. Also, investors remained cautious ahead of the Reserve Bank of New Zealand (RBZN) monetary policy decision scheduled for next week.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 6-1/2 basis points to 2.910 percent, the yield on 5-year note slid 4-1/2 basis points to 2.50 percent and the yield on short-term 2-year ended nearly 2-1/2 basis point lower at 2.040 percent. The 10-year US Treasury yield fell 5 basis points during Thursday’s session to a one-month low.

The Reserve Bank of New Zealand (RBNZ) is expected to hold its August interest rate setting meeting on Thursday, August 10, but it will be released on Wednesday at 2100 GMT. An Australian bank and financial-services provider, Westpac in its latest report said that the market pricing for the RBNZ has been fairly stable during the past week, a hike 100 percent priced in by August 2018.

It noted that they are less optimistic and expecting the official cash rate (OCR) to remain unchanged at 1.75 percent through next year. The central bank’s policy prescription remains the same: the economy needs to be allowed to continue to grow and gradually use up its spare capacity, in order for inflation to settle around the 2 percent target midpoint on a sustained basis, the Westpac research note added.

Meanwhile, the NZX 50 index traded 0.10 percent lower at close at 7,746.12 by 06:50 GMT, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -51.58 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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