New Zealand bonds gain at close despite better-than-expected trade surplus; eyes on RBNZ’s monetary policy meeting

New Zealand bonds gained at the time of closing Wednesday as investors have largely shrug-off the better-than-expected trade surplus for the month of May and investors will now wait to watch the Reserve Bank of New Zealand’s (RBNZ) monetary policy meeting, scheduled for today by 21:00GMT.                                        

At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, slumped 2 basis points to 2.95 percent, the yield on the long-term 20-year note slumped 2-1/2 basis points to 3.27 percent while the yield on short-term 2-year closed flat at 1.92 percent.

New Zealand’s trade balance improved again in May, with a NZD294 million surplus over the month. This was a little stronger than we or the market expected. Adjusting for normal seasonal variation, exports were down only slightly, falling 0.3 percent in May following a solid 6 percent rise in the previous month. Imports were down 4.3 percent in May in seasonally adjusted terms. This was mainly due to reduced imports of oil due to the Marsden Point maintenance shutdown.

Reserve Bank Governor Adrian Orr has another easy Official Cash Rate (OCR) decision on his hands this week, with all major bank economists picking no change. But looming issues, such as low business confidence and ongoing Mycoplasma Bovis eradication concerns, may see the OCR remaining on hold for longer than previously expected.

Meanwhile, the NZX 50 index closed 0.07 percent higher at 8,996.52, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -156.72 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex