New Zealand bonds gain at close after RBNZ Acting Governor Spencer hints at uncertainties, fails to surprise markets

New Zealand government bonds gained at the times of closing Thursday after the Reserve Bank of New Zealand’s (RBNZ) Acting Governor Grant Spencer hinted that a number of uncertainties continue to hover and the central bank may need to adjust monetary policy accordingly.

Also, the central bank failed to surprise market participants, leaving the Official Cash Rate (OCR) unchanged, signaling that it shall remain on hold for a considerable period of time.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 3 basis points to 2.83 percent, the yield on 20-year plunged 2 basis points to 3.35 percent and the yield on short-term 2-year closed 1/2 basis point lower at 1.92 percent.

As expected, the Reserve Bank left the OCR unchanged at 1.75 percent and continued to signal that it expects the OCR to remain on hold for an extended period. The RBNZ still expects that the economy will accelerate this year, eventually pulling inflation slowly up towards two percent. 

The most interesting aspect of today’s RBNZ statement was that it contained no reference at all to the exchange rate, for the first time since 2012. From here, attention will turn to the new Policy Targets Agreement between the Minister of Finance and the incoming Governor, to be signed within a day or two.

Meanwhile, the NZX 50 index closed 0.09 percent lower at 8,600.81, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bearish at -98.72 (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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