The New Zealand government bonds closed a tad higher Monday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance.
The yield on the benchmark 10-year bond, which moves inversely to its price, fell ½ basis point to 3.105 percent, the yield on 7-year note also ended 1/2 basis point lower to 2.758 percent and the yield on short-term 2-year note slid 2 basis points to 2.115 percent.
Federal Reserve Chair Janet Yellen, in her congressional testimony, strengthened bets that the central bank was on the right path to hike interest rates in December. This was the first direct signal from the Fed after December last year.
On the other hand, the New Zealand has been struck by a powerful 7.5 magnitude earthquake on Monday morning with its epicentre located on the east coast of the country’s South Island. While the damage is still being assessed, analysts estimate rebuilding work could cost 2.5 billion NZ Dollar, reported The Business Times.
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 is 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 8.89 points to 6,848.95. While at 05:00 GMT, the FxWirePro's Hourly New Zealand Dollar Strength Index remained slightly bearish at -82.20 (lower than -75 represents a bearish trend).
