New Zealand bonds close lower ahead of RBNZ monetary policy decision; likely to gain following global debt market

The New Zealand government bonds closed lower Wednesday ahead of the Reserve Bank of New Zealand monetary policy decision, where it is widely expected to lower its official cash rate by 25 basis points to a new record low of 1.75 percent.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1 basis points to 2.755 percent, the yield on 5-year note ended 1-1/2 basis points higher at 2.280 percent and the yield on short-term 2-year note bounced 2 basis points to 2.030 percent.

The Reserve Bank of New Zealand’s decision on the OCR is due out 9th November and Graeme Wheeler’s intimations that further cuts are required going forward certainly seem to hint that rates could be lowered.

“We expect the Reserve Bank to reduce the OCR to 1.75 percent next week. The RBNZ has strongly signalled a further easing, and failing to deliver could lead to an unwanted and self-defeating market response. Beyond next week’s decision, the RBNZ is likely to retain a mild bias towards further easing. But we expect the OCR to remain on hold through 2017,” said Westpac in its research note.

We also support the fact that the Reserve Bank of New Zealand is still widely expected to cut rates at its November 10 policy meeting to 1.75 percent.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed down 230.15 points to 6,664.21.