Funds Rush to Buy New Zealand Bonds, Betting RBNZ Will Raise Rates More Slowly Than Markets Expect

Money & Banking··NZUSCA·Read original
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Some investors are increasing their allocations to New Zealand bonds, betting that a fragile recovery will make the Reserve Bank of New Zealand, or RBNZ, cautious about raising interest rates and help New Zealand bonds continue to outperform those of many developed nations. The New Zealand bond index has fallen just 0.3% from the start of the year through Friday, compared with declines of more than 1% for Canadian and US bond indices. UK government bonds are down nearly 3%, and Japanese bonds have fallen more than 4%. Markets expect the RBNZ to raise rates four more times by August next year, after two increases already this year, but RBNZ Assistant Governor Karen Silk said the next hike may not come until December. RBNZ board member Prasanna Gai takes the view that the policy rate may already be at a neutral level. Harvey Bradley, head of global rates at Insight Investment in London, said New Zealand bonds with roughly two to five years remaining are among the most attractive relative to bond markets globally. Tamsin Wilding, a portfolio manager at Harbour Asset Management in Wellington, warned that New Zealand bonds are starting to look expensive, with the 10-year New Zealand yield more than 30 basis points below its Australian counterpart. New Zealand inflation remains above the RBNZ's 1–3% target band and is not expected to return to the 2% midpoint until early 2028. Economic data due this week may show New Zealand's economy grew 2.2% in the second quarter from a year earlier before growth slows later in the year, according to a survey of economists.

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Others▼ · 1 stocks

Off-coverage companies 2

Harbour Asset ManagementPrivate± Mixed
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Insight InvestmentPrivate± Mixed
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