New Zealand bonds slump at close despite disappointing Q2 CPI data; eyes on GlobalDairyTrade price auction

New Zealand bonds slumped at close Tuesday as investors have largely shrugged-off the disappointment from the country’s consumer price inflation (CPI) for the second quarter of this year. Focus will now remain on the GlobalDairyTrade (GDT) price auction, due to be held later today for clear direction in the debt market.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped 4-1/2 basis points to 2.90 percent, the yield on the long-term 20-year note also surged 4-1/2 basis points to 3.22 percent and the yield on short-term 2-year closed 4 basis points higher at 1.87 percent.

New Zealand’s consumer prices rose 0.4 percent in the June quarter, lifting the annual inflation rate from 1.1 percent to 1.5 percent. Fuel and food prices made the biggest contribution, but a range of ‘core’ measures of inflation also rose modestly on an annual basis.

Setting aside food and fuel, the tradables component of the CPI was softer than markets  expected. However, there was nothing in the details that would point to an ongoing source of weakness, such as a squeeze on retailers’ margins or a lack of exchange rate pass-through. Instead, there were some notable idiosyncratic price movements.

Meanwhile, the NZX 50 index closed 0.016 percent lower at 8,978.89, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 43.64 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex