New Zealand’s 10-year government bond yield rose to around 4.89% in early September, its highest level since May 2024, as inflation worries intensified following a sharp increase in oil prices. Brent crude remained above US$100 per barrel amid escalating tensions in the Middle East, heightening the risk of deeper disruptions to energy supplies. That, in turn, reinforced inflation concerns and bolstered expectations that central banks will keep monetary policy tighter for longer.
Last week, the Reserve Bank of New Zealand lifted the official cash rate (OCR) by 25 basis points to 2.75% after annual inflation reached 4.1% in the June quarter. The Bank signaled that further increases are possible, noting that inflation is expected to stay elevated through the rest of the year. Markets are currently pricing in at least one additional OCR hike, with the policy rate projected to reach about 3% by the end of 2026.
Rising US Treasury yields also contributed to the upward pressure on New Zealand bonds. The US 10-year Treasury yield climbed to its highest level since 2023 after the US Treasury’s US$6 billion bond buyback fell short of investor expectations.
