New Zealand bonds gain ahead of GDT price auction, weak consumer sentiment lend support

The New Zealand bonds closed higher Monday as investors wait to watch the GlobalDairyTrade price auction, scheduled to be held on later in today. Also, weak consumer sentiment has lent support to bond prices.

The yield on the benchmark 10-year bond, which moves inversely to its price slumped 4 basis points to 3.25 percent at the time of closing, the yield on 7-year note also plunged 4 basis points to 2.82 percent while the yield on short-term 2-year note traded 2 basis points lower at 2.11 percent.

New Zealand’s Dairy prices fell 6.3 percent in the latest GDT price auction, following a 3.2 percent decline a fortnight ago. Within this, powder prices performed poorly, with whole milk powder prices falling 12.4 percent to USD2,794/MT, and skim milk powder prices falling 15.5 percent. Meanwhile, AMF continues to be well-supported at high levels, edging down only 0.8 percent.

Confidence among New Zealand households nudged down a little in the early part of 2017. Rather than signalling any material softening in the household sector, it looks more like households are continuing to saunter along.

The Westpac McDermott Miller Consumer Confidence survey showed that household confidence edged back in the March quarter, falling 1.2 points. Given normal quarter-to-quarter volatility, and the soggy summer weather, that is a fairly small fall. And after gains in the past two quarters, this still leaves confidence among households at around average levels.

Lastly, markets will remain glued to watch the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, scheduled to be unveiled on March 22 for detailed direction in the debt market.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index traded 1.41 percent lower at 7,057.05, while at 05:00 GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 131.64 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex