New Zealand bonds plunge at close following global debt market footprints, profit-booking

The New Zealand bonds suffered a sharp plunge at the time of closing Friday, tracking footprints left behind by the global debt market in a massive reaction to the hawkish comments made by the European Central Bank (ECB) Governor Mario Draghi earlier in the week. Also, investors have booked their profits on the last trading day of the week amid lack of any significant economic data. 

At the time of closing, the yield on the benchmark 10-year bond, which moves inversely to its price, jumped 9-1/2 basis points to 2.99 percent, the yield on 7-year note surged 9 basis points to 2.88 percent and the yield on short-term 2-year note ended 6 basis points higher at 2.09 percent.

The sell-off in sovereign bonds continued as earlier this week a series of central bank comments were largely viewed by investors as more hawkish than expected and German inflation data, released yesterday surpassed market expectations, further adding value to the ECB’s recent stance.

Lastly, the economy is performing solidly, though on some metrics such as GDP per capita the economic story is sub-par. Indicators point to solid momentum over the year ahead; businesses and consumers are confident and financial conditions are supportive. However, the economy does not have the capacity to accelerate sharply. Labour and credit constraints are headwinds, ANZ Research reported recently.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index plunged nearly 1.00 percent at the time of closing to 7,611.44 while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 70.94 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex