New Zealand 10-year bond yields hit over 7-month low at close ahead of GDT price auction

The New Zealand 10-year bond yields hit a little over 7-month low on Tuesday as investors wait to watch the country’s GlobalDairyTrade (GDT) price auction, scheduled to be held on June 6.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, slumped 5-1/2 basis points to 2.75 percent, the yield on 7-year note plunged 4 basis points to 2.65 percent and the yield on short-term 2-year note ended 1-1/2 basis points lower at 1.93 percent.

At the last dairy price auction, held on May 17, dairy prices were pushed higher, rising 3.2 percent overall. That was the fifth consecutive rise, taking 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.

"We expect milk production to continue trending higher over the remainder of this year, as farmers respond to higher farmgate prices on offer," Westpac commented in its report.

The NZ bonds have been closely following developments in oil markets because of their impact on inflation expectations. The International benchmark Brent futures fell 0.49 percent to USD49.23 and West Texas Intermediate (WTI) traded 0.51 percent lower at USD47.16 by 05:40 GMT.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.07 percent higher at 7,494.97 while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 136.79 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex