New Zealand bonds end sharply higher in muted session on lower investors’ risk appetite

New Zealand government bonds ended Wednesday’s session on a sharp note despite a muted trading session that witnessed data of little economic significance. Also, the country had registered a trade surplus for the month of December. Further, S&P Ratings has affirmed the country’s AA rating, with a stable outlook, against the backdrop of a healthy fiscal performance amid slow improvement in the net debt ratio over the next few years.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1-1/2 basis points to 2.93 percent, the yield on 20-year plunged 2-1/2 basis points to 3.43 percent and the yield on short-term 2-year too ended 2-1/2 basis points lower at 1.95 percent.

New Zealand recorded a trade surplus of NZD640 million in December, much stronger than market expectations of a small deficit. The main surprise was a surge in exports to a new record high, though this is likely to be short-lived.

Exports rose by 13 percent in seasonally adjusted terms in December, setting a new monthly record by quite some margin (10 percent above the previous record set in July last year). The rise was led by a 12 percent jump in dairy export volumes - a rise that is unlikely to be sustained, as dry weather means that the volume of milk available to be exported will be down on last season. There were also gains in exports of meat, fruit, crude oil and machinery.

Meanwhile, the NZX 50 index closed nearly 2 percent higher at 8,442.01, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bullish at 141.30 (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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