New Zealand bonds gain modestly following drop in dairy prices at GDT auction

The New Zealand government bonds gained modestly at the time of closing Wednesday, following a drop in global dairy prices at the latest GlobalDairyTrade price auction held late yesterday.

The yield on the benchmark 10-year bond, which moves inversely to its price fell 1 basis point to 3.34 percent at the time of closing, the yield on 7-year note also slipped nearly 1 basis point to 2.90 percent and the yield on short-term 5-year note also traded 1 basis point lower at 2.61 percent.

Dairy prices fell 6.3 percent in last night’s auction, following a 3.2 percent decline a fortnight ago. Within this, powder prices performed poorly, with whole milk powder prices falling 12.4 percent to AUD2,794/MT, and skim milk powder prices falling 15.5 percent.

"With dairy prices known to gather momentum in both directions, dairy prices might push a bit lower in the near term. But with Chinese demand looking to be holding steady for now, and global supply still well shy of 2016’s peaks, we expect prices to remain well off 2016’s lows and expect to see some improvement in global dairy prices over the second half of this year," Westpac commented in its latest research report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.15 percent higher at 7,178.22, while at 05:00 GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -135.92 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex