Investors search for income

AMP Capital’s head of investment strategy for New Zealand Greg Fleming said: “It looks as if the low deposit interest rate environment in New Zealand could continue even longer than expected. With such an outlook, the defensively-positioned yield enhancing investment ideas should continue to attract strong interest.”

He said, while there was mounting pressure to lift bond yields globally, the drivers of New Zealand domestic term deposits rates were more locally determined.

He said competition to secure deposit funding had resulted in only a marginal increase in rates. If unemployment rate reductions were added to the Reserve Bank’s mandate, as the government has signalled it plans, that could keep the official cash rate lower for longer.  “People who are waiting for an uptick back to what they see as normal term deposit rates could be waiting a couple of years.”

In general, that made it harder for investors to turn lump sums into income. There was a risk that people would take too much risk in the search for yield and could be hurt when the cycle turned.