New Zealand 10-year bond yield closes at 3-week high on rebound in investors’ risk appetite; short-term yields fall

The New Zealand 10-year bond yield closed at a 3-week high Tuesday as investors’ risk sentiments improved, following a trade deal between the United States and Mexico. However, the short-term and super-long bond yields ended today’s session on a weaker note amid a muted trading week that is scheduled to witness data of little economic significance.

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped nearly 3 basis points to 2.633 percent, the yield on the long-term 20-year note slid nearly 1 basis point to 2.950 percent and the yield on short-term 2-year too closed 1 basis point down at 1.715 percent.

Risk appetite improved on Monday after President Donald Trump announced that the US is to pursue a new trade accord with Mexico to replace the North American Free Trade Agreement (NAFTA). Trump also called Canada to join the deal soon whilst Mexican President Pena Nieto said he was “quite hopeful” Canada would soon be incorporated.

The Canadian Foreign Minister is now traveling to Washington for talks on this. Key provisions of the potential agreement include increasing regional automotive content to 75 percent from 62.5 percent in NAFTA and for 45 percent (from 40 percent also in NAFTA) of production to be done by workers earning at least USD16 an hour. Duty free access for agriculture products remains.

Meanwhile, the NZX 50 index closed 0.083 percent higher at 9,214.02, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -106.39 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex