New Zealand bonds close higher as food prices ease in October; GDT auction in focus

New Zealand bonds closed higher on Monday as investors sentiment was dented by weaker commodity prices and a central bank disinclined to raise interest rates.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 4-1/2 basis points to 3.200 percent, the yield on 20-year note also dipped 4-1/2 basis points to 3.405 percent and the yield on short-term 2-year ended 2-1/2 basis points lower at 2.000 percent.

New Zealand food prices eased in October as fruit and vegetables came into season and some dairy products were in for heavy discounting at grocery stores. The food price index fell 0.1 percent, according to Statistics New Zealand.

Looking ahead, the Fonterra Cooperative Group heads into this week's GlobalDairyTrade auction after three consecutive declines in dairy product prices while the CRB Index of 19 commonly traded commodities fell 2 percent last week.

Moreover, markets are still less than convinced by the prospects of the center-left coalition government and its plans for the Reserve Bank of New Zealand (RBNZ). With the appointment of a new Governor looming, there are worries that the central bank could see a shift in its policy outlook, potentially moving back towards a dovish bias, reported Torfx.

A prospective alteration to the RBNZ’s mandate has also extroverted the appeal of the New Zealand bonds, with investors nervous of the central bank being tasked with stimulating employment in addition to its inflation target.

Meanwhile, the NZX 50 index closed 0.35 percent higher at 8,089.80, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bearish at -81.91 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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