New Zealand bonds end higher after RBNZ maintains unchanged policy decision, balanced outlook

The New Zealand bonds ended on the upside after the Reserve Bank of New Zealand (RBNZ) remained unchanged in its monetary policy decision, revealed early today while maintaining a balanced outlook of the economy.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, slumped 1-1/2 basis points to 2.78 percent, the yield on 7-year note also slipped 1-1/2 basis points to 2.69 percent and the yield on short-term 2-year note traded flat at 1.99 percent.

This morning the RBNZ once again left the Official Cash Rate (OCR) unchanged at 1.75 percent. As expected, the RBNZ seems to have taken developments over the last six weeks as neutral for monetary policy, and today’s statement ended on the same note as the last several statements: "Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly".

The central bank remains positive on the outlook for the local economy. However, with a softer than expected starting point, the pick-up in underlying inflation is expected to remain gradual.

"We continue to expect no change in the OCR this year or next year," Westpac commented in its latest report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.49 percent higher at 7,563.69 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish at 80.35 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex