New Zealand bonds close higher on short-covering; investors await March trade balance

The New Zealand bonds closed lower Friday as investors covered previous short positions. Also, the country’s trade surplus for the month of March limited the rise in bonds.

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, fell 1/2 basis point to 3.07 percent, the yield on 7-year note also slipped 1/2 basis point to 2.74 percent while the yield on short-term 2-year note plunged 2 basis points to 2.10 percent.

New Zealand’s business confidence held steady in April, after waning in recent months. However, firms have remained optimistic about their own prospects (which is generally the better indicator for economic growth), with a net 38 percent of firms expecting their activity to strengthen for the year ahead.

Further, employment intentions remain strong, with all sectors except agriculture expecting an increase in staff numbers going forward. The activity indicators from this month’s survey are consistent with our forecast for GDP growth continuing at an annual pace around 3 percent.

Lastly, inflation expectations were unchanged from March at 1.83 percent. Pricing intentions rose considerably across most sectors, with the aggregate reaching the highest level since March 2015.The rise in pricing indicators from 2016’s lows is consistent with the surge in annual inflation to 2.2 percent in Q1.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.33 percent higher at 7,378.75, while at 06:00GMT the FxWirePro's Hourly NZD Strength Index remained highly bearish at -119.37 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex