New Zealand bonds sharply jump at close after coalition government revises down economic and fiscal update

New Zealand government bonds jumped sharply at the time of closing after the country’s coalition government revised down its economic and fiscal forecasts in its half-yearly update.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 6 basis points to 2.78 percent, the yield on 20-year note plunged 7-1/2 basis points to 3.32 percent while the yield on short-term 2-year ended 1 basis point lower at 1.95 percent.

Unveiling the half-year budget update, Finance Minister Grant Robertson said the government expects to post a slightly lower-than-forecast budget surplus in 2018 as it pours money into housing and social services.

The government predicted an NZD2.54 billion surplus in the year to June versus Treasury's prior forecast of NZD2.86 billion in its August pre-election economic and fiscal update. It plans to spend NZD32.9 billion from its capital spending budget over the next four years, rising from the proposed NZD26.2 billion in the August update.

The Treasury cut its forecast economic growth to 3.3 percent in the year to June 2018 and 3.4 percent the following year, compared to the predicted 3.5 percent growth for each year in the August forecast.

Meanwhile, the NZX 50 index closed 0.47 percent higher at 8,323.75, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 124.00 (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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