New Zealand bonds end higher despite better-than-expected labour market data; eyes on RBNZ’s monetary policy decision

New Zealand government bonds ended Wednesday’s session on a higher note as investors have largely shrugged-off the better-than-expected Q4 employment market data, released overnight. Investors are now awaiting the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, scheduled to be unveiled today by 20:00GMT, followed by the policy statement and Governor Spencer’s speech at 21:00GMT.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1/2 basis point to 2.97 percent, the yield on 20-year also slid 1/2 basis point to 3.49 percent while the yield on short-term 2-year slumped 5 basis points to 1.90 percent.

The New Zealand labor market tightened further in the December 2017 quarter, with the unemployment falling from 4.6 percent to 4.5 percent, a new nine-year low. The number of people employed rose by 0.5 percent, and the participation rate fell only slightly from its all-time high in the September quarter.

The Reserve Bank of New Zealand (RBNZ) is expected to again leave the OCR at 1.75 percent at its Monetary Policy Statement next Thursday. The Bank has maintained a watchful stance for some months now. And while it sounded a slightly more upbeat tone in November, a broad spirit of cautiousness has underpinned its assessment for some time. It has been close to three months since the November Monetary Policy Statement, and developments have certainly been mixed since then, Westpac Research reported.

Meanwhile, the NZX 50 index fell 0.57 percent at close to 8,194.73, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 52.55 (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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