New Zealand bonds plunge at close after RBNZ remains on hold, Gov Wheeler maintains slight optimism

The New Zealand bonds plunged at the time of closing Thursday after the Reserve Bank of New Zealand (RBNZ) left interest rates on hold, while clearly maintaining a neutral bias. Also, Governor Wheeler’s comments remained tad optimistic, adding value for riskier assets.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.83 percent, the yield on 7-year note also slid 1 basis point to 2.68 percent and the yield on short-term 2-year too ended 1 basis point lower at 2.01 percent.

The Reserve Bank of New Zealand (RBNZ) left interest rates at a record low 1.75 percent and kept projections for rates largely unchanged, wrong footing doves who had thought it might lower the future path of hikes.

The RBNZ did say a lower kiwi would be needed to lift inflation, but also noted that it had risen in part because of weakness in the US dollar. The kiwi is up nearly 4 per cent since June. Further, the central bank projected a steady course on rates until 2020 while expecting headline inflation to struggle back into the midpoint of its 1-3 percent target band over the medium-term.

Meanwhile, the NZX 50 index remained 0.13 percent lower at close at 7,789.71 by 06:20 GMT, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -170.85 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest