New Zealand bonds close firm following weakness in U.S. Treasuries, coalition announcement in focus

New Zealand government bonds closed lower Thursday following weakness in the U.S. Treasuries; however, investors still remain cautious as the country waited for the outcome of government coalition negotiations.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, gained 3-1/2 basis points to 2.955 percent, the yield on 15-year note also jumped 3 basis points to 3.29 percent and the yield on short-term 2-year ended 2-1/2 basis points higher at 2.09 percent.

Winston Peters, the leader of the minor party that was left holding the balance of power after the country’s September 23 election failed to deliver a clear winner, had said he would announce the results of coalition negotiations with the two major parties by the afternoon (local time) on October 19. With evening approaching no decision has been announced, FT reported.

Moreover, the GDT Price Index dipped 1 percent, with an average selling price of USD3,204 per tonne, in the auction held in the early hours of the morning. The index fell 2.4 percent at the previous sale, according to GDT Events, which runs the auctions.

Prices had risen in the second quarter on strong global demand and as production eased, but have since had a bumpy ride. Nevertheless, analysts were upbeat on the outlook for dairy prices given very wet weather had curbed production in New Zealand, the world's largest dairy exporter.

Meanwhile, the NZX 50 index closed 0.11 percent higher at 8,124.07, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -151.60 (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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