New Zealand bonds close tad lower ahead of RBNZ’s monetary policy meeting

The New Zealand bonds closed tad lower at the time of closing Wednesday ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting, scheduled to be concluded today by 21:00GMT. However, investors have largely shrugged-off the weaker-than-expected trade balance data for the month of August, adding to losses in bond prices.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, rose nearly 1 basis point to 2.713 percent, the yield on the long-term 20-year note also climbed nearly 1 basis point to 3.028 percent and the yield on short-term 2-year too closed nearly 1 basis point higher at 1.775 percent.

At present, the RBNZ appears to be in a state of flux, adjusting to the new dual mandate and to the new Governor's views.

The Reserve Bank of New Zealand (RBNZ) is expected to leave the OCR unchanged at late today’s OCR Review. However, there is still a one in three chance that the RBNZ cuts the OCR over the coming year, Westpac Research reported.

A neutral Review would simply restate that the next move could be “up or down.”

The other possibility is that the RBNZ adopts a “soft” easing bias, explicitly warning that if the economy fails to accelerate as expected, the OCR could fall. This would match RBNZ comments made in the media, and would be in the spirit of open and frank communication that the RBNZ has embraced, the report added.

Meanwhile, the NZX 50 index closed 0.042 percent higher at 9,349.85, while at 07:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 21.79 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex