New Zealand bonds slump after geopolitical tensions ease; Trump administration continues to surprise markets

New Zealand bonds slumped at the time of closing Friday after global political conditions start to improve, with the United States’ President Donald Trump continuing to surprise market participants.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped 2-1/2 basis points to 2.77 percent, the yield on the long-term 20-year note also surged 2-1/2 basis points to 3.29 percent and the yield on short-term 2-year too closed 2-1/2 basis points higher at 1.88 percent.

Caution may be the key word today on overnight news that the US will levy new steel and aluminum tariffs on EU, Mexico, and Canada (after a temporary exemption) which swiftly prompted planned retaliatory responses from the recipients. With the resurgence of trade tensions, Wall Street slipped overnight and the flight to quality drove global bonds higher, albeit the 10-year UST bond yield ended at 2.86 percent.

Asian bourses may fluctuate today, as a fickle Trump administration continues to surprise its trade partners, and investors await fresh cues from the US trade tantrum and tonight’s key US’ nonfarm payrolls, unemployment and average hourly earnings report (which is anticipated at 190k, 3.9 percent and 2.6 percent y/y respectively for May versus 164k, 3.9 percent and 2.6 percent in April). 

Meanwhile, the NZX 50 index closed 0.26 percent lower at 8,636.16, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 102.03 (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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