New Zealand bonds surge at close ahead of RBNZ’s monetary policy meeting, Governor Orr’s speech

New Zealand bonds surged at the time of closing Monday amid a muted trading session that witnessed data of little economic significance. Investors will now remain focused on the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, scheduled to be unveiled on May 9 for further direction in the debt market.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slumped 1-1/2 basis points to 2.79 percent, the yield on the long-term 20-year note also plunged 1-1/2 basis points to 3.34 percent and the yield on short-term 2-year closed 2-1/2 basis points lower at 1.89 percent.

The Reserve Bank of New Zealand (RBNZ) is expected to leave the Overnight Cash Rate (OCR) unchanged at 1.75 percent at its monetary policy meeting, scheduled to be held next Thursday. This is the first Monetary Policy Statement with Adrian Orr as Governor and will be watched closely for any hints that the RBNZ’s views and approach to monetary policy are changing, according to the latest report from ANZ Research.

This Monetary Policy Statement will also be the first under the new Policy Targets Agreement, signed between the new Governor and the Minister of Finance. The RBNZ is now tasked with contributing to supporting "maximum sustainable employment" in the context of its medium-term inflation target – a stepping stone towards a true dual mandate.

Meanwhile, the NZX 50 index closed 0.45 percent higher at 8,587.94, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 28.12 (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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