New Zealand bonds close mixed in subdued trade; Q2 GDP in focus

12 September 2016, 09:30
Eko Rediantoro

The New Zealand government bonds closed mixed Monday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. Also, investors remain focused on the second quarter gross domestic product (GDP) figure, which is scheduled to be released on Wednesday 04:15 GMT.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1 basis point to 2.455 percent, the yield on 7-year note ended 1 basis point lower at 2.135 percent and the yield on short-term 2-year note jumped 6 basis points to 1.935 percent.

In the early trading session, Kiwi 10-year bond yield bounced more than 10 basis points as the United States Federal Reserve rate hike speculation gathered steam following hawkish comments from the Fed policymakers. Also, Bloomberg’s implied portability for a rate hike increased to 30 percent for the September policy meeting, up from 25 percent calculated at the end of last week.

The Boston Federal Reserve President Eric Rosengren (a voter in 2016) said that he sees a reasonable case for gradual rate increases and a failure to continue the path of gradual rate normalisation could shorten the recovery; history shows the difficulty of slowing the economy after waiting too long to tighten policy.

He further added that payrolls growth has been somewhat choppy of late, but the United States economy is performing quite well, has proven resilient to international risks, and is at/close to full employment.

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