New Zealand bonds slump at close on declining demand for safe-haven assets ahead of Q3 employment report

The New Zealand bonds slumped at the time of closing Friday as investors drifted apart from safe-haven assets despite the country’s ongoing political turmoil surrounding the appointment of ministers after the formation of the coalition government.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 3.05 percent, the yield on 20-year note jumped 2 basis points to 3.60 percent and the yield on short-term 2-year ended 1 basis point higher at 2.08 percent.

The New Zealand dollar sank to a new five-month trough of USD0.6818, a level unseen since early May and matching a trough last reached in June 2016. The currency was set for its second weekly loss, having been under pressure since the left-leaning Labour Party won control of the government in coalition with two minor parties.

Investors are worried the coalition will go hard against immigration and foreign investment and shake up the mandate of the Reserve Bank of New Zealand.

Lastly, the country’s trade deficit was NZD1.1 billion in September, again coming in below market expectations of NZD900 million. Exports rose 4.2 percent m/m (sa) but were outdone by imports, which lifted 4.9 percent m/m (sa). As expected, dairy export volumes bounced back strongly (+37 percent m/m sa) from a similar-sized fall last month, while seasonally adjusted fruit exports were down 22.7% m/m. Imports were again strong at NZD4.9 billion sa.

Meanwhile, the NZX 50 index closed flat at 8,084.99, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -0.88 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest