New Zealand bonds jump sharply at close ahead of GDT price auction, RBNZ monetary policy meeting

The New Zealand bonds sharply jumped at the time of closing Monday as investors poured into safe-haven assets ahead of the GlobalDairyTrade (GDT) price auction, scheduled to be held on November 7. Of utmost importance is the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision, due to be unveiled on November 8 by 20:00GMT, which will provide detailed direction to the debt market.       

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 9-1/2 basis points to 2.78percent, the yield on the 20-year note plunged 11-1/2 basis points to 3.29 percent and the yield on short-term 2-year traded 2-1/2 basis points lower at 1.96 percent.

Last week’s labor market figures were strong, at least at face value. However, it is fair to say we are turning more circumspect on the near-term growth picture. Even ahead of recent political uncertainty, the chances of a growth air-pocket were high as the economy grappled with late-cycle challenges and a softer housing market. Political uncertainty adds to near-term risks, with the vibe from businesses turning jittery.

In the face of a shifting policy mix, what firms say about their own activity and pricing, as well as the mix of investment and employment intentions going forward, will be critical to watch. This week, the RBNZ is likely to remain cautious too, even if inflation risks are pointing a little more one way.

"We suspect the RBNZ will feel there are still too many uncertainties to shift off its cautiously neutral message – we agree. Also this week, our Truckometer and Monthly Inflation Gauge will provide early signals on Q4 growth and inflation trends," Westpac research commented in its latest report.    

Meanwhile, the NZX 50 index closed 0.14 percent lower at 8,053.63, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -58.32 (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