New Zealand bonds close higher as investors remain cautious ahead of UK PM May’s Brexit speech

The New Zealand government bonds closed higher Tuesday as investor speculation remain cloudy ahead of the United Kingdom’s Prime Minister Theresa May's Brexit speech.

The yield on the benchmark 10-year bond, which moves inversely to its price, ended 2 basis points lower at 3.14 percent, the yield on 7-year note also closed down 1 basis point to 2.81 percent and the yield on the short-term 2-year note also moved down 1 basis point to 2.20 percent.

Further, UK PM Theresa May's Brexit speech is scheduled to be held on Tuesday by 11:45 GMT. We expect that she will lay out plan to exit the European Union that would see Britain losing access to the bloc's single market.

Additionally, investors will also be awaiting the GDT auction prices scheduled to take place on Tuesday. Also, investors remain keen to focus on the upcoming Q4 CPI data, which is scheduled for release next week.

Moreover, in terms of recent economic data, New Zealand’s food prices dipped 0.5 percent m/m on a seasonally adjusted basis, after rising slightly in November and being unchanged in October, Statistics New Zealand said. On an unadjusted basis, food prices declined 0.8 percent m/m.

The CPI increased at a 0.4 percent annual pace in the September quarter, the eighth straight quarter below the Reserve Bank's 1-3 percent target band. The CPI for the December quarter will be released next week, which the Reserve Bank expects will show inflation returned back within the target band.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed 0.17 percent lower at 7,062.96, while at 5:00 GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish for second straight day at 137.50 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex