New Zealand bonds close flat in muted trading ahead of FOMC policy decision

New Zealand government bonds closed flat Tuesday as investors remained sidelined in any major trading activity amid a silent session that witnessed no data of major economic significance. Also, investors are now closely eyeing the Federal Open Market Committee’s (FOMC) monetary policy decision, due on December 13 for further direction in the debt market.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained tad higher at 2.86 percent, the yield on 20-year note flat at 3.41 percent and the yield on short-term 2-year ended on a steady note at 1.99 percent.

The NZ data calendar during the week ahead doesn’t hold much for markets (Q3 manufacturing activity, REINZ house sales, and manufacturing PMI), but there will be some interest in the HYEFU on Thursday.

The key event this week will be the FOMC decision on Wednesday. A hike is almost assured so that more attention will be paid to the Fed’s projections of future hikes. An upward drift in the projection range and potential firming in other forecasts should have the USD firming into the FOMC. However, expectations are rising, and the market could be disappointed if the 2018 median does not rise to imply four hikes, even if the Fed sends a strong “full steam ahead message”.

Meanwhile, the NZX 50 index closed 0.04 percent higher at 8,280.81, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 126.73 (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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