The New Zealand government bonds closed higher to finish off the week on Friday as investors wary ahead of Britain’s referendum on European Union membership, scheduled to take place on 23rd June.
The yield on the benchmark 10-year bonds, which moves inversely to its price fell 1-1/2 basis point to 2.475 percent and the yield on short-term 2-year bonds dipped 2 basis points to 2.105 percent.
On Thursday, the Federal Open Market Committee left fed funds rate unchanged in a 0.25-0.50% range, in line with market expectations. One key highlight of the statement was the note that the pace of improvement in the labour market has slowed while growth in economic activity appears to have picked up, adding that although the unemployment rate has declined, job gains have diminished.
Also, FOMC diminished outlook for growth coupled with largely downgraded forecasts for the overnight rate, though median expectations remain unchanged for 50 basis points worth of tightening in 2016.
Moreover, the latest polls by various corporate bodies in the United Kingdom in run up to the June 23 Brexit referendum indicate that the percentage of citizens in favor of “leaving” the European Union (EU) has outnumbered those who want to “remain”, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc.
According to a new UK poll by IG/Survation showed the Leave side is ahead of Remain by 45-42 percent. This is a somewhat narrower pro-Brexit balance than most other recent surveys — which all suggest that the outcome of the EU referendum in one week's time is too close to call with confidence.
Similarly, a new UK poll by Ipsos-Mori, 53 percent participants favoured leaving the EU and 47 percent supported for remaining. This is in line with the other recent surveys showing a swing to a moderate pro-Brexit balance, but contrasts markedly with the previous IPSOS-Mori poll in May that found a double-digit net balance in favour of 'Bremain'.
In addition, the Bank of England (BoE) MPC meeting has ended unanimously in the decisions to maintain the official Bank Rate at 0.5 percent and keep the programme of asset purchases paused at 375 billion pounds, as universally expected.
Also, the Bank of England warned that Brexit could materially affect inflation and the GDP outlook, push the pound down 'sharply', and cause adverse spillovers to the global economy.
The New Zealand Q1 Gross Domestic Product (GDP) rose 0.7 percent q/q, marginally higher than the market consensus for 0.5 percent, but lower from previous 0.9 percent q/q in the last quarter of 2015. Also, Q1 GDP rose 2.8 percent y/y, beating market expectations of 2.6 percent, from 2.3 percent during the same period a year ago. The latest growth was driven by the construction and health industries, but partly offset by decreases in the primary industries and manufacturing.
The New Zealand’s benchmark S&P/NZX50 Index closed down 41.50 points to 6,847.07.
The material has been provided by InstaForex Company – www.instaforex.com