New Zealand government bond yields hit record lows

• The 10- and two-year New Zealand government bond yields fell to record lows on Wednesday. 
• RBNZ cut rates by 50 basis points and signaled readiness to do more. 

New Zealand government bond yields slipped to record lows on Monday as the Reserve Bank of New Zealand cut rates by 50 basis points to a new lifetime low of 1% and Governor Orr left the doors open for further easing in the near-term. 

The yield on the 10-year government bond yield fell 15 basis points to a record low of 1.8 percent. Meanwhile, the two-year yield, which is more sensitive to interest rate expectations, fell more than 20 basis points to a new lifetime low of 0.795%. 

The market was positioned for a 25 basis point. So, the 50 basis point cut caught markets by surprise, leading to a sharp slide in both the NZD and the government bond yields. 

Governor Orr defended the bigger-than-expected rate cut by calling it a necessary adjustment to support economic and recession. Orr added that the latest aggressive move does not rule out further easing and expressed readiness to explore the negative interest rate policy (NIRP), if required.