New Zealand bonds slump at close in muted trading session ahead of GDT price auction

New Zealand government bonds slumped at the time of closing Monday as investors wooed away from safe-haven buying ahead of the country’s GlobalDairyTrade (GDT) price auction, scheduled to be held on Mach 6 for further direction in the debt market.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 4 basis points to 2.98 percent, the yield on 20-year surged 4-1/2 basis points to 3.50 percent while the yield on short-term 2-year closed 1 basis point higher at 1.93 percent.

Lingering doubts about New Zealand supply conditions helped drive dairy prices sharply higher at the latest GDT auction, with the GDT price index gaining 5.9 percent since the last sale in mid-January.

Whole milk powder prices, which have the greatest bearing on Fonterra's farmgate milk price, firmed by 7.6 percent to USD3226/tonne - the third gain in a row since falling to USD2755/tonne last December - and thereby reinforcing the co-op's current forecast of USD6.40/kg of milk solids for the current season.

Lastly, Fonterra has said that it expects production to fall by 3 percent over this season, compared with last, due to drought in parts of the country.

Meanwhile, the NZX 50 index closed 0.10 percent lower at 8,279.83, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -6.85 (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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