New Zealand bonds close marginally weaker on Fed members’ hawkish remarks

The New Zealand bonds closed marginally weaker Monday as investors drove out from safe-haven buying after US Fed rate hike speculation gathered steam following hawkish comments from the Fed policymakers.

The yield on the benchmark 10-year bond increased 1/2 basis point to 2.315 percent and the yield on 7-year note also closed ½ basis point higher at 1.985 percent and the yield on short-term 2-year note bounced 1/2 basis point to 1.810 percent.

Federal Reserve Vice Chairman Stanley Fischer stroke a hawkish tone during a speech in Colorado, saying that, looking ahead, he expects GDP growth to pick up in the coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes.

Moreover, Fischer signalled that this year interest rate hike is still on the table and added that the US economy is very near to meeting the Federal Reserve’s goals.

Last week, the US Fed’s William Dudley (voter in 2016) said that his overall views have not changed much and that he is looking for stronger second half of 2016 growth than was seen to start the year.

In addition, Dudley reiterated that the US economy is edging closer towards the point where it will be appropriate to raise interest rates further, noting that September was possible. He also added that the Fed Funds futures were underpricing the likelihood of policy tightening.

Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by exports, imports and trade balance figure.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 56.91 points to 7,462.16.