New Zealand bond yields snap gains at close despite strong employment data

The New Zealand bond yields snapped previous gain at the close of trading Wednesday despite market witnessing better than expected employment figures.

The yield on the benchmark 10-year bond fell 1 basis point to 2.200 percent and the yield on 7-year note ended 1 basis point lower at 1.895 percent and the yield on short-term 2-year note slid 1 basis point to 1.785 percent.

New Zealand’s second quarter employment change increased 2.4 percent q/q, higher than the consensus of 0.6 percent q/q, from 1.2 percent in the first quarter of 2016. On an annual basis, it grew 4.5 percent y/y versus previous 2.0 percent y/y.

Similarly, unemployment rate declined to 5.1 percent, lower than the market expectations of 5.3 percent, as compared to previous 5.2 percent. Additionally, the labour force participation rate increased to 69.7 percent, against market expectations of 68.8 percent fall. This marks the highest participation rate recorded since at least 1986.

On Tuesday, New Zealand’s Global Dairy Trade (GDT) price index rose 12.7 percent as the recovery in dairy markets begins to gather some real momentum, from previous 6.6 percent.

Moreover, the RBNZ in its last week’s monetary policy meeting lowered its official cash rate (OCR) by 25 basis points to fresh record low of 2.00 percent. This decision was widely expected by the market participants and economists.

In the RBNZ in its Monetary Policy Statement mentioned that global growth is below trend despite being supported by unprecedented levels of monetary stimulus and significant surplus capacity remains across many economies and, along with low commodity prices, is suppressing global inflation.

The central bank further mentioned that weak global conditions and low interest rates relative to New Zealand are placing upward pressure on the New Zealand dollar exchange rate and the trade-weighted exchange rate is significantly higher than assumed in the June Statement.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 44.35 points to 7,355.02.