New Zealand bonds close mixed as investors await Brexit outcome

The New Zealand government bonds market closed mixed on Thursday with investors treading water as the final Brexit countdown begins.

The yield on benchmark 10-year bond, which moves inversely to its price rose 1/2 basis point to 2.620 percent, yield on 7-year note dipped 1/2 basis point to 2.300 percent and the yield on 5-year bond also fell 1/2 basis point to 2.240 percent.

Moreover, the Reserve Bank of New Zealand (RBNZ) in its inflation report said that low inflation has been key puzzle for New Zealand economy and inflation expectations have become more backward looking. They further mentioned that the speed of adjustment in inflation expectations, proxied by the spread between short- and longer-term inflation expectations, can explain the unusually low inflation.

Interestingly, voting begins in EU referendum, but recent polls showed the outcome of the referendum is too close to call. The result likely known around this time tomorrow (0600GMT-0700GMT). Latest online poll by YouGov showed 51 percent has voted in favour of 'Bremain', while remaining 49 percent voted for a 'Brexit'. Also, poll by the YouGov, 35 percent say its 'risky' to stay in the European Union, while 53 percent say it is 'safe' to stay in the EU.

Another UK phone poll by ComRes indicated 48 percent Britons voted to 'Remain' in the European Union, while 42 percent voted for 'Leave'; rest remained undecided.

Interestingly, according to Betfair the probability of the Remain camp winning in today's UK referendum has increased by 78 percent, according to response from the latest campaign polls.

On the other hand, last-minute UK poll from TNS showed 43 percent favouring Leave and 41 percent Remain and a new UK (online) poll by Opinium showed 45 percnet favouring leaving the EU and 44 percent in favour of remaining. This represents a shift to a pro-Brexit balance from pro-EU balances previously.

The New Zealand’s benchmark S&P/NZX50 Index closed up 0.58 points to 6,821.35.