New Zealand bonds close tad higher as food prices decline in December; GDT auction in focus

The New Zealand government bonds closed modestly higher Monday after recent economic data showed that the country’s food prices fell in December ahead of the fourth-quarter consumer inflation data, which is scheduled for release next week. Also, thin trading activity was witnessed as the U.S. markets remain closed for 'Martin Luther King Day'.

The yield on the benchmark 10-year bond, which moves inversely to its price, ended 1 basis point lower at 3.15 percent, the yield on 7-year note also closed down 1 basis point to 2.82 percent and the yield on the short-term 2-year note moved down 1 basis point to 2.20 percent.

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.

Moreover, market participants 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.

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 0.40 percent higher at 7,074.94, while at 5:00 GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish for second straight day at 87.31 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex