New Zealand bonds slump post reading higher-than-expected Q1 CPI

The New Zealand bonds slumped Thursday after reading the higher-than-expected consumer price inflation for the first quarter of this year, released earlier today. Also, the country’s inflation rose to a 5-year high, which further waned investors from safe-haven assets.

The yield on the benchmark 10-year bond, which moves inversely to its price, jumped 3-1/2 basis points to 2.97 percent, the yield on 7-year note also surged 3-1/2 basis points to 2.68 percent and the yield on the short-term 2-year note too traded 3-1/2 basis points higher at 2.15 percent by 04:20GMT.

New Zealand’s consumer prices rose 1.0 percent in the March quarter, lifting the annual inflation rate from 1.3 percent to 2.2 percent. This is the first time inflation has been above 2 percent since 2011. The result was above the market median for a 0.8 percent rise. Importantly, it was well above the RBNZ’s February MPS forecast of a 0.3 percent quarterly rise.

"The stronger than expected result, including signs that tradeables inflation may have more momentum than we had anticipated, does suggest some upside risk to our view for the Official Cash Rate. The RBNZ’s February forecasts assumed inflation wouldn’t be back at these sort of levels until 2019," Westpac Research commented in its latest report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index fell 0.37 percent to 7,192.05 by 04:30GMT, while at 04:00GMT the FxWirePro's Hourly NZD Strength Index remained neutral at -17.15 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex