New Zealand bonds gain at close tracking U.S. Treasuries ahead of GDT price auction

The New Zealand bonds closed on the upside Tuesday tracking firmness in the United States counterparts as investors wait to watch the GlobalDairyTrade (GDT) price auction, scheduled to be held later today for further direction in the debt market.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, slumped 6-1/2 basis points to 2.99 percent, the yield on 7-year note also plunged 6-1/2 basis points to 2.65 percent and the yield on the short-term 2-year note too traded 6 basis points lower at 1.98 percent.

Positive momentum in dairy prices continued to build in the latest GDT auction, with the aggregate price index rising 3.6 percent.  That’s the fourth consecutive gain and takes prices to the highest level since early February.

While demand from China has remained solid and this is helping to put a floor under prices, dairy prices seem to be responding to concerns about New Zealand supply off the back of recent poor weather. This season’s production is largely done and dusted, and it’s not clear to us that next season’s production will be significantly impacted.

"We expect rising global supply to weigh on prices over the second half of this year," Westpac commented in its research report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.30 percent lower at 7,407.61 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -102.83 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex