New Zealand bonds plunge at close on improving risk sentiments ahead of Q4 GDP

New Zealand government bonds plunged at the time of closing Monday as investors’ risk appetite improved, tracking optimism over the U.S. economy, following promising number form the non-farm payroll sector. Also, market participants are awaiting the country’s fourth-quarter gross domestic product (GDP), due on March 14 by 21:45GMT for further direction in the debt market.

At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 5-1/2 basis points to 3.02 percent, the yield on 20-year also climbed 5-1/2 basis points to 3.52 percent and the yield on short-term 2-year closed 3-1/2 basis points higher at 1.97 percent.

The United States’ February nonfarm payrolls (NFP) data was very strong at 313k which beat market expectations of 205k, albeit with an unchanged unemployment rate of 4.1 percent as the labor participation rate climbed to 63 percent and average hourly earnings remained subdued at 0.1 percent mom (2.6 percent y/y). This Goldilocks scenario of strong labor markets but lagging wage inflation prompted Wall Street and UST bond yields higher on Friday, impacting the Asian bourses at the start of this week.

Further, Fed’s Evans opined that "there is merit to the argument that waiting just a little bit longer" would help "to be absolutely sure that the inflation data is going to move". On Friday’s NFP report, he noted that "this is one of those interesting developments, that even though the job market is very strong, we still haven’t seen really strong wage growth".

Meanwhile, the NZX 50 index closed 0.88 percent higher at 8,463.99, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 26.03 (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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