New Zealand bonds close higher as RBNZ cuts official cash rate to new record low of 1.75 pct

The New Zealand government bonds closed higher Thursday as the Reserve Bank of New Zealand (RBNZ) lowered its official cash rate by 25 basis points to a new record low of 1.75 percent from previous 2.00 percent.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2 basis points to 2.955 percent, the yield on 7-year note also ended 2 basis points lower at 2.640 percent and the yield on short-term 2-year note slid 2 basis points to 2.085 percent.

The Reserve Bank of New Zealand in its November monetary policy meeting lowered the official cash rate once again by 25 basis points, after easing in August, a move is taken for the seventh time since June 2015, in an attempt to boost the slow-moving economy. Further cuts have not completely been ruled out, especially given the continuing uncertainty around the global environment and lingering softness in inflation.

However, developments over the past few months have been positive for the New Zealand economy, and the downside risks to the RBNZ’s view have diminished. We expect that the OCR will remain on hold for an extended period. However, longer term rates look set to rise from here, said Westpac in its research report.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 69.51 points to 6,733.72.