The New Zealand government bonds traded higher Wednesday as dairy prices posted their largest fall over ten months at the first dairy auction of 2017.
In intraday trading, the yield on the benchmark 10-year bond, which moves inversely to its price, fell 3 basis points to 3.31 percent, the yield on 7-year note also dipped 3 basis points to 2.92 percent and the yield on short-term 2-year note slid 3 basis points to 2.23 percent.
Dairy product prices have fallen at Fonterra's GlobalDairyTrade auction, sliding for a second consecutive auction as whole milk powder prices unexpectedly sank amid increased volume on offer.
The GDT price index fell 3.9 percent to $3463, down from $3656 at the previous auction two weeks ago. Some 22,396 tonnes of product was sold, edging up from 22,321 tonnes at the previous auction. Whole milk powder dropped 7.7 percent to $3294 a tonne.
Moreover, the gross domestic product (GDP) of New Zealand jumped more than what markets had initially anticipated, during the third quarter of this year. However, it remained below the Reserve Bank of New Zealand’s (RBNZ) target range, thus compelling the central bank to remain on hold for the foreseeable future.
The GDP rose by 1.1 percent in the September quarter. But while this was stronger than our and the market forecast, growth in the March and June quarters were revised to 0.7 percent, from 0.9 percent previously in the second quarter. This resulted in annual growth of 3.5 percent, a touch weaker than expected, data released by Statistics New Zealand showed.
We foresee that bond prices will keep drifting between small gains and losses in quiet next week’s trading session. Also, trading activity to resume from the second week of January, 2017 as global market receives no more important data till then.
Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed 1.35 percent higher at 6,974.30. While at 05:00 GMT, the FxWirePro's Hourly New Zealand Dollar Strength Index stood neutral at +14.38 (higher than +75 represent a bullish trend).
