New Zealand 10-year bond yield closes at 2-year low after business confidence rock-bottoms in a decade

The New Zealand 10-year bond yield closed at a 2-low low Thursday after the country’s business confidence worsened in a decade, thus weighing on investors’ sentiments and leading to a rise in debt prices.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, plunged nearly 6-1/2 basis points to 2.575 percent, the yield on the long-term 20-year note slumped nearly 7 basis points to 2.895 percent while the yield on short-term 2-year closed nearly 1 basis point up at 1.673 percent.

New Zealand’s business confidence remained weak in August. General business sentiment fell further to -50, the lowest level since 2008. Firms’ own-activity expectations, which correspond more closely with GDP growth, were unchanged for the month but remain at a nine-year low, according to the latest report from Westpac Research.

"We suspect that a large part of the fall in business confidence reflects firms’ discomfort with the new Government’s policies, especially the planned changes to labour laws. (There was a similar plunge in confidence in mid-2000, when the Government was passing the Employment Relations Act.) Prime Minister Ardern’s speech this week was certainly aimed at alleviating these concerns, for instance by committing to no more than one or two ‘fair pay’ agreements during the Government’s current term," the report added.

Meanwhile, the NZX 50 index closed 0.24 percent lower at 9,339.88, while at 07:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bearish at -99.93 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex