New Zealand bonds slump at close as investors await June trade balance

The New Zealand bonds slumped at the time of closing Tuesday as investors remained muted in any major trading activity in a session that lacked data of any economic significance. Also, markets will be focussing on the country’s trade balance data for the month of June, scheduled for release on July 25 for further direction in the bond market. 

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, jumped 2 basis points to 2.96 percent, the yield on 7-year note also climbed 2 basis points to 2.83 percent while the yield on short-term 2-year note ended flat at 1.95 percent.

The NZD eased off its recent highs with a quiet start to the week. The RBNZ speech tomorrow will be examined for the extent the Bank is, or is not, looking through recent currency strength. Locally, broad-based strength across New Zealand’s commodity prices could be viewed as the offset for exporters in these sectors.

Dairy prices, particularly whole milk powder, edging back up could provide further support. But equally, a weak global inflationary pulse and elevated NZD keeps downward pressure on tradable inflation.

The risks that the OCR stays low for longer are growing. In data this week, the trade balance should recover in seasonally adjusted terms, while new mortgage lending will likely weaken further. Building consent issuance is likely to continue to struggle to push much higher.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.40 percent higher at  7,713.06 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish at 70.92 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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