New Zealand bonds end week on softer note on strong Chinese GDP, CPI in focus next week

The New Zealand government bonds ended the week on a softer note Friday, following a strong reading of China’s gross domestic product (GDP) which further dragged the country’s debt market. Also, investors are eyeing the country’s consumer price inflation data scheduled for release next week.

Further, S&P Ratings have affirmed the country’s currency and credit rating, while maintaining a stable outlook of the economy.

The yield on the benchmark 10-year bond, which moves inversely to its price, jumped 4 basis points at time of closing at 3.27 percent, the yield on 7-year note also ended 3-1/2 basis points higher at 2.94 percent and the yield on short-term 2-year note surged 2 basis points to 2.31 percent.

China’s economy expanded 6.8 percent for the whole year of 2016, as widely expected. The stabilization of the economy was largely due to the rally in the property market, which has also triggered concerns of asset bubble. In the coming year, China is expected to put more effort to balance the growth, financial risks and external challenges especially from Trump.

Further, the ratings agency affirmed the foreign currency rating at 'AA' and local currency long-term sovereign credit rating at 'AA+'. It further hopes to witness a recovery in the fiscal status of the country in the near-term.

Lastly, the country’s headline inflation is likely to have accelerated in the fourth quarter. According to an ANZ research report, the headline CPI is expected to have accelerated 0.3 percent sequentially, a tad above RBNZ’s November MPS pick of 0.2 percent. Annual inflation is anticipated to rise to 1.2 percent.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed 0.20 percent lower at 7,048.47, while at 5:00 GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 58.68 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex