New Zealand bonds close mixed after RBNZ brings forward rate-hike forecast

New Zealand government bonds closed mixed on Thursday after the Reserve Bank of New Zealand hinted that official cash rate (OCR) may need to rise somewhat sooner than already expected as it amended up inflation prediction.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 1-1/2 basis points to 2.940 percent, the yield on the 20-year note rose 9-1/2 basis points to 3.490 percent and the yield on short-term 2-year traded 1 basis point lower at 2.065 percent.

The RBNZ has maintained the Official Cash Rate (OCR) at 1.75%. This was widely expected. The RBNZ in its statement noted that the CPI projected to remain near mid-point target and numerous uncertainties remain and policy may need to adjust accordingly. It said the impact of new government policies remain very uncertain and global growth continues to improve, economic growth is projected to strengthen. Following this, the New Zealand dollar jumped higher in immediate response.

The RBNZ now expects inflation to reach the midpoint of its 1 percent to 3 percent target in the second quarter of next year, nine months sooner than previously forecast, as capacity pressures and a weaker currency stoke consumer prices. It brought forward projections for a rate hike to the second quarter of 2019 from the third, Bloomberg reported.

Meanwhile, the NZX 50 index closed 0.24 percent lower at 8,021.09, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish at 83.16 (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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