25 Jul 2012

Eurozone uncertainty caps NZ rates

7:03 am on 25 July 2012

Westpac market strategist Imre Speizer says uncertainty in the Eurozone is pushing investors to snap up New Zealand Government bonds, which could keep domestic interest rates low in the long-term.

In the latest bad news to hit Europe, Moody's Investors Service has cut the outlook on Germany's AAA credit rating from stable to negative.

The agency also downgraded the sovereign ratings the Netherlands and Luxembourg, citing rising uncertainty over the outcome of the eurozone debt crisis.

There are fears the move could precede a full-blown downgrade for Germany, marking a grim turn for the country which is seen as the safeguard of financial stability in Europe.

Mr Speizer says negative risks from the Eurozone has caused offshore investors to buy the bonds because they perceive them as high-yielding safe havens.

He says long-term interest rates will fall even further relative to the short-term ones which will attract more borrowers.