New Zealand bonds gain at close after business confidence continues to soften; investors await GDT price auction

The New Zealand bonds gained at the time of closing Tuesday after the nation’s business confidence across firms continued to remain soft, according to a survey conducted by the New Zealand Institute of Economic Research (NZIER) showed today. Also, investors are awaiting the GlobalDairyTrade price auction, scheduled to be held later today.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1-1/2 basis points to 3.00 percent, the yield on 7-year note also slipped 1-1/2 basis points to 2.84 percent and the yield on short-term 2-year ended 1 basis point lower at 2.10 percent.

Headline business confidence fell from 17 to 7 – that is consistent with the signal from ANZ’s own Business Outlook survey. Political uncertainty is no doubt weighing. But sentiment remained above long-run averages and interestingly the drop wasn't as sharp as in other pre-election periods (normally 19 point drop vs 10 points this time).

Further, Capacity utilisation fell from 92.1 percent to 91.3 percent, and the number of firms reporting capacity as a limiting factor eased to 15 percent (from 16 percent). That is above long-run averages, but the lowest since Q1 2015. Easing capacity is consistent with the economy growing at a below-trend pace of late.

Lastly, a final tally of the country’s general election results is awaited on October 7, when "special votes", which will make up 15 percent of the total and which includes overseas votes, are released.

Meanwhile, the NZX 50 index closed 0.06 percent higher at 7,933.42, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 13.91 (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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