New Zealand bonds flat at close after RBNZ’s policy decision fails to move markets

New Zealand bonds flat at close after RBNZ’s policy decision fails to move markets

The New Zealand bonds remained flat at the time of closing Thursday after the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, failed to infuse any major changes in the debt market.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 3.00 percent, the yield on 7-year note flat at 2.85 percent and the yield on short-term 2-year ended 1 basis point lower at 2.10 percent.

The RBNZ left the OCR at 1.75 percent this morning, and also maintained a clear neutral tone. That is hardly surprising given election proximity, key RBNZ leadership changes, and somewhat mixed economic developments. As it has stated for some time, the RBNZ believes that “Monetary policy will remain accommodative for a considerable period”.

However, the RBNZ appears to have downgraded its forecast of GDP growth over the coming year. This could be a hint in the direction of a more dovish November Monetary Policy Statement.

The RBNZ acknowledged the recent improvement in global growth, which was described as having “improved” in recent quarters. That was a slight upgrade on the August description that global growth was becoming “more broad-based.” And the RBNZ acknowledged that the exchange rate had fallen by more than anticipated. The RBNZ said that a lower NZ dollar “would help”, which is a slight downgrade of August’s “is needed.”

Meanwhile, the NZX 50 index closed flat at 7,913.62, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -63.91 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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