New Zealand bonds gain at close as political uncertainty still hovers on amid muted trading

The New Zealand bonds gained at the time of closing Thursday as political uncertainties continued to hover around, sending bond prices higher amid a muted trading session that witnessed data of little economic significance. Also, Prime Minister Jacinda Ardern’s latest policy to impose home purchase ban on outsiders, further weighed on investors’ confidence, thus leading to a rise in safe-haven bond prices.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.91 percent, the yield on the 20-year note tad lower at 3.46 percent and the yield on short-term 2-year also slid 1 basis point to 1.99 percent.

In recent times New Zealand’s economic landscape has been changing. The construction sector seemed to stall for much of this year; GDP growth has been below expectations; businesses’ confidence in their trading outlook has fallen; the house price boom came to a halt, and consumer spending has flat-lined since April.

To date, the RBNZ has been running with very upbeat forecasts for economic growth and house prices into 2018, but this needs to change. The RBNZ will run with lower near-term GDP and house price forecasts in next week’s Monetary Policy Statement.      

Meanwhile, the NZX 50 index closed 0.36 percent higher at 8,083.06, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 166.97 (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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