Higher bond yields may raise New Zealand's borrowing costs

Higher bond yields are expected to increase the government’s borrowing costs by hundreds of millions. This situation means that taxpayers and ratepayers in New Zealand may need to pay more to manage the country's significant debt. Various factors, including U.S. tax and tariff policies and the lingering effects of the pandemic, have led to investors asking for higher returns on government bonds. This trend also affects local government and corporate bonds, raising the returns those investors want. Furthermore, it influences the interest rates that banks charge for long-term mortgage fixes. Both Finance Minister Nicola Willis and Treasury advisor Dominick Stephens have warned about these changes ahead of the Budget announcement on May 22. Willis emphasized, “The price of borrowing has gone up. There’s no escaping that for New Zealand.”