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The New Zealand bonds closed on the upside Wednesday after reading a drop in the country’s latest GlobalDairyTrade (GDT) price auction, held overnight. In addition, the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, due late today will add further direction to the debt market.
At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, slumped 1-1/2 basis points to 2.80 percent, the yield on 7-year note slipped 1 basis point to 2.69 percent and the yield on short-term 2-year note traded 1 basis point lower at 1.99 percent.
In the latest GDT price auction, held overnight, Dairy prices fell 0.8 percent in last night’s GlobalDairyTrade auction, the first fall since early March. The fall was driven by a 3.3 percent drop in whole milk powder prices. However, skim milk powder prices rose 1.4 percent, and fat products continued to reach new highs.
"Our forecast of a USD6.50/kgMS milk price for this season allows for some pullback in world dairy prices over the rest of this year. Milk production among the major exporting nations has turned higher again this year, as prices have risen back above break-even levels," Westpac commented in its latest research report.
Lastly, the RBNZ will once again leave the OCR at 1.75 percent on Thursday, which is a view shared by the economist consensus and market. While key reasons for the RBNZ cutting in 2015 and 2016 (lower terms of trade and receding inflation expectations) have corrected, that’s being countered by the NZD, lack of movement in core inflation (globally and here), a slower housing market and financial conditions tightening via the credit channel.
Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.78 percent lower at 7,527.11 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -36.89 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
