(Bloomberg) — Short-term New Zealand sovereign bonds notched their worst losing streak in a month as traders locked in profits from a world-beating rally and adjusted expectations of central bank easing.
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Yields on policy-sensitive two-year notes climbed a third day to as high as 3.83%, the longest rise since Dec. 17, according to data compiled by Bloomberg. Yields on the nation’s benchmark 10-year notes advanced for an eighth time in nine sessions to 4.77%, the highest level since June.
The slump comes after a rally in which local debt outperformed its developed-market peers in the 12 months through Thursday, as the Reserve Bank of New Zealand embarked on aggressive policy easing to support an economy in recession.
Inflationary pressures from the incoming Trump administration and Friday’s strong US jobs data sparked a repricing of the rate path for the world’s central banks. Investors are now cashing in on previous gains, making New Zealand debt the worst performer among major bond markets this week.
The selloff is likely to continue as speculative traders cut expectations of another 50 basis point reduction this month amid signs the economy is slowly recovering, according to Stuart Ritson, a strategist at Bank of New Zealand in Wellington. With muted inflation supporting a front-loaded easing cycle, “we think that terminal official cash rate pricing is too high and will revert lower,” he said.
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