New Zealand bonds end lower as investors await GDT price auction, Q2 GDP

The New Zealand bonds ended Tuesday session on a weaker note as investors wait to watch the country’s second-quarter gross domestic product (GDP), scheduled to be released on September 20 by 22:45GMT, besides, the GlobalDairyTrade price auction, due on September 19 for further direction in the bond market. Also, the country’s general elections, due on September 23 will add to any deeper movement in bond prices.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1 basis point to 3.01 percent, the yield on 7-year note also fell 1 basis point to 2.86 percent while the yield on short-term 2-year ended 1/2 basis point higher at 2.12 percent.

The Westpac McDermott Miller Consumer Confidence Index fell 1 point in September to a level of 112.4. However, this followed gains over the past year and left confidence at firm levels.

New Zealand general election will be held on Saturday, September 23. Current polling is pointing to a very close race between the incumbent right of centre National Party and the main centre-left opposition Labour Party. If the current government returns to power, it probably won’t have a big impact on our forecasts.

An average of the past ten elections’ residuals shows that the NZD became less overvalued in the run-up to the election, rose slightly during the two days afterwards, and then after about two weeks, it rose by around a cent. However, the behaviour appears to be independent of party, which suggests the decline and fall pattern simply reflects uncertainty pre-election and some certainty postelection.

"We expect that they will show the economy expanded by 0.8 percent over the quarter. That would leave the level of output in the economy up 2.8 percent over the past year. The expected firmness in the June quarter reflects a rebound from earlier temporary weakness in the agriculture and transport sectors," Westpac Research commented in its latest report.

Meanwhile, the NZX 50 index ended 0.08 percent higher at 7,764.53, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained slightly bullish at 99.11 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest