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The New Zealand government bonds closed modestly higher Wednesday after the recent data showed that country’s latest dairy auction prices rose lower than the market expectations. Also, investors await the Reserve Bank of New Zealand’s monetary policy decision, which is scheduled to be released on September 21.
The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1 basis point to 2.620 percent, the yield on 7-year note also ended 1 basis point lower at 2.290 percent and the yield on short-term 2-year note slid 1 basis point to 1.995 percent.
Dairy prices in the latest Global Dairy Trade auction declined to 1.7 percent following a rise of 7.7 percent at the previous auction. Also, milk prices declined by 0.2 percent following a 3.7 percent in the last auction.
Moreover, the RBNZ is set to meet next Thursday, and we foresee that the central bank will keep its official cash rate on hold at 2.00 percent, but continue to signal that a rate cut is likely in November. If inflation fails to improve over the coming months, the country’s apex bank may ease rate to 1.5 percent further before December.
The New Zealand economy expanded strongly in the second quarter; however, it was a tad lower than consensus expectations. In sequential terms, the economy expanded 0.9 percent in the June quarter, as compared with the consensus projection of 1.1 percent.
Also, first quarter’s growth was upwardly revised to 0.9 percent q/q from 0.7 percent. The New Zealand economy is bolstering and is likely to grow strongly in the second half of 2016, said ANZ in a research note.
On an annual basis, the country’s economy expanded 3.6 percent in the June quarter, slightly below consensus expectations of 3.7 percent. Per capita growth expanded to 0.5 percent in sequential terms, while the first quarter’s print was revised up from 0.1 percent to 0.3 percent.
Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed down 27.28 points to 7,281.17.
