New Zealand bonds surge at close on cues from disappointing Q4 consumer inflation index

New Zealand government bonds surged at the time of closing Friday on cues from the country’s consumer price-led inflation index (CPI) for the fourth quarter of this year disappointed market expectations, flocking investors into safe-haven assets.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 1-1/2 basis points to 2.92 percent, the yield on 20-year also slipped 1-1/2 basis points to 3.41 percent while the yield on short-term 2-year ended 1 basis point lower at 1.97 percent.

New Zealand’s inflation was more subdued than expected at the end of 2017, largely reflecting a lack of price pressures for internationally-traded goods. The Consumer Price Index rose by 0.1 percent in the December quarter, bringing the annual inflation rate down from 1.9 percent to 1.6 percent.

The result reinforces the view that the need for OCR hikes is a long way off. Despite an improving global economy, inflation – particularly in terms of the manufactured goods that New Zealand imports – remains largely absent. Indeed, domestic inflation has picked up from its lows but is still well below pre-financial crisis levels. 

Meanwhile, the NZX 50 index closed 0.70 percent lower at 8,311.42, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -42.45 (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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