New Zealand bonds end on a higher note after FOMC meeting minutes show concerns over sluggish inflation

The New Zealand bonds ended Thursday’s session on a higher note after the Federal Reserve policymakers remained concerned over the sluggish pace of inflation in the economy. However, the upside was limited after members continued to signal the possibility of a third rate hike this December.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 3.00 percent, the yield on 7-year note also slipped 1 basis point to 2.83 percent and the yield on short-term 2-year too ended a basis point lower at 2.08 percent.

Federal Reserve officials see the economy expanding at a steady clip and indicate that an interest rate hike later this year is a near lock, despite some divisions over where inflation is headed.

Minutes from the September meeting of the policymaking Federal Open Market Committee show members anticipating that the factors slowing down inflation will pass. The expectation is that inflation will hit the 2 percent target the central bank believes is consistent with healthy growth.

Where the Fed goes in the future seems to be more of an open question, as members debated over whether low wage and price pressures are more of a long-term problem. The concerns over inflation come as the Fed's preferred gauge is showing a gain of only about 1.4 percent. Despite the low readings, confidence remained fairly high that the 2 percent target is likely to be hit soon.

Meanwhile, the NZX 50 index closed 0.09 percent higher at 8,068.12, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -57.96 (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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