New Zealand bonds narrowly mixed amid lack of major economic events

The New Zealand government bonds traded narrowly mixed in a subdued trading session Friday amid lack of any major domestic or global economic events.

The yield on the benchmark 10-year bond, which moves inversely to its price, jumped 5 basis points to 3.44 percent at the time of closing, the yield on 7-year note fell 1 basis point to 3.05 percent and the yield on short-term 2-year note also dipped 1 basis point to 2.38 percent.

New Zealand’ headline consumer inflation was 0.4 percent q/q in the last quarter of 2016, trending above market consensus 0.3 percent growth. On an annual basis, due to base effects, inflation rose to 1.3 percent y/y, marking the end of eight consecutive quarters below the bottom of the RBNZ’s target band. Also, tradable prices rose 0.3 percent q/q (-0.1 percent y/y), while non-tradable prices rose 0.6 percent q/q (2.4 percent y/y).

Recover in crude oil prices were a boost to inflation as expected, but given the ongoing strength in the New Zealand dollar (NZD) we expect further downward pressure on these components going forward.

The Reserve Bank of New Zealand (RBNZ) is expected to hold its first monetary policy meeting of 2017 on February 9. It is widely expected to maintain the official cash rate (OCR) at a historic low of 1.75 percent amid stronger than expected lift in inflation was more broad-based than widely anticipated.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed 0.29 percent higher at 7,134.26, while at 5:00 GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 49.55 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex