Investors are buying New Zealand bonds, betting that sluggish growth will keep the Reserve Bank of New Zealand cautious on rate hikes and extend outperformance over global peers. Asset manager Insight Investment favors shorter maturities, arguing the market has priced in too many hikes, while Harbour Asset Management highlights a steep yield curve and contained government spending. New Zealand bond yields jumped to multiyear highs on Friday amid oil-price-driven wagers of an October rate hike, though RBNZ officials had previously signaled a slowing pace.

Traders price in four more hikes by August next year. Harvey Bradley of Insight said 2- to 5-year bonds are near the top of the pack globally, while Fergus McDonald of Amova sees 10-year yields over 5% as good value. Harbour's Tamsin Wilding notes NZ bonds appear expensive versus Australian peers and prefers inflation-linked bonds.

RBNZ Assistant Governor Karen Silk suggests the next hike may not come until December, while board member Prasanna Gai sees the rate already in neutral territory. New Zealand inflation remains above the 1-3% target, with a return to 2% not expected until early 2028, and second-quarter GDP may have expanded 2.2%.