New Zealand bonds end higher post RBNZ maintains neutral policy stance

The New Zealand bonds ended Thursday’s session on a higher note after reading the Reserve Bank of New Zealand’s (RBNZ) neutral monetary policy stance, wherein the central bank maintained its official cash rate (OCR) at a record-low of 1.75 percent.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, fell 1 basis point to 3.04 percent, the yield on 7-year note also slipped 1 basis point to 2.71 percent and the yield on the short-term 2-year note too traded 1 basis point lower at 2.03 percent.

The RBNZ left the OCR on hold at its May policy review. However, the accompanying policy statement and interest rate projection were a bit more dovish than we and markets had been expecting.

As in the past two policy statements, the RBNZ reiterated that “monetary policy will remain accommodative for a considerable period”. That wasn’t too surprising, as even if the OCR was to rise from here, it would still be very low. But digging into the details of today’s report showed that the Reserve Bank’s projection for the OCR was unchanged from February when it last published forecasts. The OCR is projected to remain on hold until September 2019, and then rise gradually further ahead.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.88 percent higher at 7,489.71, while at 06:00GMT the FxWirePro's Hourly NZD Strength Index remained neutral at 7.60 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex