New Zealand bonds end lower ahead of GDT price auction, RBNZ monetary policy meeting

The New Zealand bonds ended the session lower Tuesday as investors wait to watch the GlobalDairyTrade (GDT) price auction, scheduled to be held on November 7. Of utmost importance is the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, due to be unveiled on November 8 by 20:00GMT, which will provide detailed direction to the debt market.         

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.83 percent, the yield on the 20-year note also slid 1 basis point to 3.35 percent and the yield on short-term 2-year too traded 1 basis point lower at 2.00 percent.

The NZD/USD’s 1.5 percent rebound last week is mainly a function of a stalled USD, added previously excessive concern the RBNZ’s mandate would change in a dovish direction.

In the face of a shifting policy mix, what firms say about their own activity and pricing, as well as the mix of investment and employment intentions going forward, will be critical to watch. This week, the RBNZ is likely to remain cautious too, even if inflation risks are pointing a little more one way.

"We suspect the RBNZ will feel there are still too many uncertainties to shift off its cautiously neutral message – we agree. Also this week, our Truckometer and Monthly Inflation Gauge will provide early signals on Q4 growth and inflation trends," Westpac research commented in its latest report.    

Meanwhile, the NZX 50 index closed 0.05 percent lower at 8,049.67, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 40.77 (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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