New Zealand bonds close modestly higher on subdued risk sentiments

The New Zealand government bonds closed modestly higher Monday as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil.

Also, Federal Reserve Chair Janet Yellen’s optimism on interest rate hike at the annual Jackson Hole Symposium on Friday, limited the fall in bond yields.

The yield on the benchmark 10-year bond fell 1/2 basis point to 2.300 percent and the yield on 7-year note ended 1 basis point lower at 1.985 percent and the yield on short-term 2-year note also slid 1 basis point to 1.825 percent.

At the Jackson Hole Symposium, Yellen said that the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives. She said that in light of the continued solid performance of the labour market and the Fed’s outlook for economic activity and inflation the case for an increase in the federal funds rate has strengthened in recent months. However, Yellen furthered that of course, the Fed’s decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.

Moreover, the Kiwi bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of New Zealand's target.

Crude oil prices declined more than 1 percent at the start of the week as Iran said it would only cooperate in talks to freeze output if other exporters recognized its right to full regain market share. Also, data showed that Iraq is producing 3.205 million barrel per day in August compared to 3.202 million barrel per day in July. The International benchmark Brent futures fell 1.26 percent to $49.52 and West Texas Intermediate (WTI) dipped 1.39 percent to $46.98 by 05:30 GMT.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed down 24.04 points to 7,367.26.