New Zealand bonds close higher on disappointing retail sales data

New Zealand bonds closed higher on Thursday following weaker-than-expected retail sales data for the third-quarter of this year. In addition, firmer U.S. Treasuries also supported the bonds prices.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 3 basis points to 2.790 percent, the yield on 20-year note also dipped 2 basis points to 3.380 percent and the yield on short-term 2-year ended 2 basis points lower at 1.970 percent.

New Zealand retail sales increased at a slower pace in the third quarter, as restaurant sales dropped without major sporting events and fuel prices continued to decline. Sales volumes rose 0.2 percent in the three months ended September 30, following a 2 percent rise in the June quarter, Statistics New Zealand figures show. The value of retail sales rose 0.1 percent, compared to the 1.6 percent increase in the previous quarter.

Moreover, markets are still less than convinced by the prospects of the center-left coalition government and its plans for the Reserve Bank of New Zealand (RBNZ). With the appointment of a new Governor looming, there are worries that the central bank could see a shift in its policy outlook, potentially moving back towards a dovish bias, reported Torfx.

A prospective alteration to the RBNZ’s mandate has also extroverted the appeal of the New Zealand bonds, with investors nervous of the central bank being tasked with stimulating employment in addition to its inflation target.

In the United States, Treasuries pushed higher across the curve overnight during a relatively quiet session ahead of the Thanksgiving holiday. Overall, Treasuries found support early on from weaker than expected durable goods orders data for October, opening last quarter of 2017 on relatively weak footing, ultimately reaching session highs in the wake of the FOMC minutes release which showed a mixed of concerns ranging from dampened inflation (weighing on December rate hike prospects) to fears of growing financial imbalances (remaining supportive of the Fed staying on course to deliver gradual further tightening).

Meanwhile, the NZX 50 index closed 0.04 percent lower at 8,101.95, while at 04:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 59.23 (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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