New Zealand bonds close narrowly mixed ahead of RBNZ’s first monetary policy decision of 2017

The New Zealand government bonds closed narrowly mixed Thursday as investors remained sideline in any big deal ahead of the Reserve Bank of New Zealand’s (RBNZ) first monetary policy decision of 2017.

Also, Chinese markets remain closed on account of Lunar New Year holidays that further lent a slight dull sentiment towards trading.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1 basis point to 3.40 percent at the time of closing, the yield on 7-year note also dipped nearly 1 basis point to 3.03 percent and the yield on short-term 2-year note ended flat at 2.33 percent.

On Wednesday, the unemployment rate rose to 5.2 percent in the December quarter, against analysts’   expectations for a small fall. The December quarter saw firm growth in employment and hours worked, slightly better than expectations. Wage inflation remained muted, as expected. However, today’s data have limited implications for the Reserve Bank of New Zealand (RBNZ).

The RBNZ is expected to hold its first monetary policy meeting of 2017 on February 9. It is widely expected to maintain the official cash rate (OCR) at a historic low of 1.75 percent amid stronger than expected lift in inflation was more broad-based than widely anticipated.

“We expect the Reserve Bank to hold the OCR at 1.75%, with a firmly neutral outlook. The RBNZ will take some comfort from the fact that inflation is finally back within the target range. But there are still some significant barriers to a further pickup in inflation from here,” said Michael Gordon in Westpac NZ Research note.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed nearly flat at 7,053.54, while at 5:00 GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -105.28 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex