90-day bill yields end at record low

By JOE HELM

The prospect of lower bank lending rates before Christmas brightened considerably yesterday as the yield on 90-day bank bills plunged to a record low.

The 90-day yield is a major factor in determining bank lending rates.

An unexpectedly large easing in monetary conditions by the Reserve Bank yesterday sent the yield plunging to 4.26 per cent, down from 4.69 per cent on Tuesday and well below the previous recent historical low of 4.35 per cent reached in January 1994

Martin Poulsen, executive vice president at Bankers Trust New Zealand, predicted the 90-day bills would soon head below 4 per cent.

Mr Poulsen said it would be difficult for the market to get used to dealing 90-day yields at below 4 per cent.

The Reserve Bank indicated yesterday it wanted the monetary conditions index at minus 400 for the March quarter but by 3pm the index had weakened only to minus 325, a 75 point easing from Tuesday's finish.

The New Zealand dollar fell 42 points to 53.12USc after reaching 52.82c earlier.

Foreign exchange dealers said there was a lot of interest to buy the kiwi at 53c.

The kiwi had initially been boosted by the US Federal Reserve chairman Alan Greenspan cutting US interest rates by 25 basis points and later by the Reserve Bank of Australia deciding not to cut rates there.

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