New Zealand bonds close modestly higher ahead of Q4 retail sales, lower equities aid rise

The New Zealand government bonds closed modestly higher Thursday as investors await to read the country’s fourth-quarter retail sales data, scheduled to be released on Friday.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1 basis point to 3.37 percent at the time of closing, the yield on 7-year note also slid nearly 1 basis point to 2.94 percent and the yield on short-term 2-year note traded 1 basis point lower at 2.25 percent.

Yellen’s comments, delivered in her testimony late Wednesday remained more hawkish than what markets had anticipated, further signalling monetary policy tightening in the near term.

"My colleagues on the FOMC and I expect the economy to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2 percent. That said, the economic outlook is uncertain, and monetary policy is not on a preset course," she said in her prepared testimony.

Further, seasonally adjusted national home sales volumes are likely to have fallen 6.3 percent m/m in January. While there has been plenty of volatility, this continues a cooler trend evident since around April 2016. In fact, turnover has fallen in seven of the past nine months and is 25 percent below April levels.

"With inflation expected to lift only gradually, we see a very low probability that recent OCR cuts will be reversed any time soon," Westpac commented in its latest research report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 1.11 percent lower at 7,099.98, while at 05:00 GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 70.74 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex