New Zealand bonds remain weaker at close after reading better-than-expected April trade balance data

The New Zealand bonds closed weaker Wednesday after reading the better-than-expected trade surplus data for the month of April, released earlier today. Further, the country’s dairy firm Fonterra lifted its forecast milk payout for the 2016-17 season by NZD0.15 to NZD6.15 per kilogram, a sign the recovery in dairy prices was finally filtering through to the dairy giant.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, rose 1-1/2 basis points to 2.87 percent, the yield on 7-year note also climbed 1-1/2 basis points to 2.55 percent and the yield on short-term 2-year note too traded 1 basis point lower at 1.96 percent.

Dairy prices pushed higher in last night’s GlobalDairyTrade auction, rising 3.2 percent overall. That was the fifth consecutive rise and takes prices to the highest level this year. Recent gains in prices have come against a backdrop of improving supply, especially from Europe and New Zealand.

Indeed, production in Europe has already risen notably off 2016’s trough, and more product will become available to global markets as New Zealand’s 2017/18 season really ramps up from September.

"Fonterra is expected to provide its initial guidance for the 2017/18 farmgate milk price next week. It’s likely to be a conservative forecast in the low-USD6s," Westpac Research commented in its latest report.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.50 percent higher at 7,421.78 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 59.18 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex