New Zealand bonds slump at close ahead of August trade balance, RBNZ’s monetary policy meeting

The New Zealand bonds slumped at the time of closing Tuesday ahead of the country’s August trade balance data, due to be released today by 22:45GMT and the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting, scheduled to be concluded on September 26 by 21:00GMT.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped nearly 2 basis points to 2.705 percent, the yield on the long-term 20-year note also surged closed to 2 basis points to 3.020 percent and the yield on short-term 2-year too closed nearly 2 basis points higher at 1.768 percent.

With some Asian markets closed yesterday for holiday, coupled with a lacklustre session on Wall Street overnight, it appears that the bullish sentiments from late last week may have run out of steam.

That said, news of US and South Korea signing a renegotiated FTA on the sidelines of the UN General Assembly may spur hopes of a more conciliatory tone elsewhere. Meanwhile, Brent oil prices topped USD80 per barrel while 10-year UST bond yields touched a high of 3.089 percent intraday ahead of tomorrow’s FOMC meeting, OCBC Bank reported in its latest Daily Treasury Outlook.

The Reserve Bank of New Zealand (RBNZ) is expected to leave the OCR unchanged at next week’s OCR Review. However, there is still a one in three chance that the RBNZ cuts the OCR over the coming year, Westpac Research reported.

A neutral Review would simply restate that the next move could be “up or down.”

The other possibility is that the RBNZ adopts a “soft” easing bias, explicitly warning that if the economy fails to accelerate as expected, the OCR could fall. This would match RBNZ comments made in the media, and would be in the spirit of open and frank communication that the RBNZ has embraced, the report added.

Meanwhile, the NZX 50 index closed 0.09 percent higher at 9,345.96, while at 07:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish at 86.23 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex