New Zealand bonds gain at close as investors eye RBNZ policy decision, Gov Wheeler’s speech

The New Zealand bonds gained at the time of closing Monday as investors wait to watch the  Reserve Bank of New Zealand’s (RBZN) monetary policy decision scheduled to be unveiled on August 9. Further, the central bank Governor Wheeler’s speech, following the meeting, will add further guidance to the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 6-1/2 basis points to 2.910 percent, the yield on 5-year note slid 4-1/2 basis points to 2.50 percent and the yield on short-term 2-year ended nearly 2-1/2 basis point lower at 2.040 percent. The 10-year US Treasury yield fell 5 basis points during Thursday’s session to a one-month low.

The RBNZ’s inflation expectations survey, which asks respondents what they think inflation will be in two years’ time, fell from 2.17 percent to 2.09 percent. The bigger picture is that a range of New Zealand’s short-term inflation expectations surveys, including the RBNZ measure, have stepped up over the past nine months.

Further, long-term inflation expectations are sitting very comfortably close to 2 percent. All of this will give the Reserve Bank comfort that it is on the right track to returning inflation to 2 percent on a sustained basis.

The Reserve Bank of New Zealand (RBNZ) is expected to hold its August interest rate setting meeting on August 9, releasing its decision by 21:00 GMT. An Australian bank and financial-services provider, Westpac in its latest report said that the market pricing for the RBNZ has been fairly stable during the past week, a hike 100 percent priced in by August 2018.

Meanwhile, the NZX 50 index remained 0.33 percent higher at close at 7,771.57 by 06:20 GMT, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -31.99 (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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