New Zealand bonds jump sharply on rising worries over new coalition government policies; eyes on Q3 employment report

The New Zealand bond sharply jumped Tuesday on a continuous rise in investors’ worries over the political health of the country after the recent formation of the coalition government, backed by NZ First Party. Also, Prime Minister Jacinda Ardern’s new policy to impose home purchase ban on outsiders, further weighed on investors’ confidence, thus leading to rise in safe-haven bond prices.        

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 6-1/2 basis points to 2.94 percent, the yield on the 20-year note plunged 7 basis points to 3.47 percent and the yield on short-term 2-year fell 1 basis point to 2.02 percent.

New Zealand businesses are expected to stay glum while the dust settles from the new Government's policies. Business confidence fell to a net 10 percent of firms negative about the year ahead, from a net zero reading with as many pessimists as optimists in September, according to the ANZ Business Outlook. In seasonally adjusted terms, business confidence fell to a net 8 percent negative from a net 16 percent positive.

Profit expectations also fell in October, with a net 12 percent anticipating bigger profits in the year to come versus 18 percent in September. A net 20 percent see exports increasing over the coming year, down from 25 percent in the prior month, and Bagrie said it was too soon to see any benefits of the lower New Zealand dollar.

Meanwhile, the NZX 50 index closed flat at 8,146.34, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -70.45 (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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