New Zealand bonds close lower on profit taking, U.S. jobless claims falls

The New Zealand government bonds closed lower Friday as investors cashed in profits relishing previous gains. Also, fewer Americans filed applications for unemployment benefits last week, highlighting the United States job market remains healthy.

The yield on the benchmark 10-year bond, which moves inversely to its price, increased 6-1/2 basis points to 2.345 percent, the yield on 7-year note ended 4-1/2 basis points higher at 2.040 percent and the yield on short-term 2-year note climbed 2 basis points to 1.875 percent.

The US Initial jobless claims for the week ending 3 September August decreased -4k to 259k, below expectations for a 265k result, as compared to the unrevised 263k reading seen in the week prior.

Moreover, the 4-week average was reported at 261.3k, down from the unrevised 263.0k reading seen in the week prior. Meanwhile, continuing claims for the week ending 27 August decreased to 2.144 million, versus the 2.151 million reading seen prior. The insured unemployment rate held unchanged at 1.6 percent. This will encourage the Federal Reserve officials looking to raise the benchmark interest rate before the end of 2016.

In addition, Richmond Fed President Lacker said late yesterday that he still sees a strong case for a September rate hike, despite the weak ISM data. He pointed out that GDP and employment seem to be 'on track'.

On Wednesday, New Zealand's GlobalDairyTrade price index rose 7.7 percent to 2,920 US dollar (3940 NZ dollar) in latest Fonterra's auction, highlighted that the worldwide glut is easing gradually. Prices of milk powder rose 3.7 percent. This marked the third consecutive auction with solidly-rising prices.

On Tuesday, in terms of recent economic data release, New Zealand’s August QV house prices increased 14.6 percent y/y, from +14.1 percent in July. Prices were up 6 percent in the past 3 months, while Auckland house prices rose +15.9 percent y/y and +6.1 percent in the past 3 months. The strong performance of housing prices has been thought to be a constraint on RBNZ easing.

Lastly, investors will remain keen to focus on the next week’s Q2 GDP data.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed down 66.14 points to 7,468.59.