New Zealand bonds rebound following firmness in U.S. Treasuries, softer Chinese CPI extends support

The New Zealand government bonds rebounded at closing session Monday, following firmness in U.S. Treasuries. Also, China, a major trading partner posted softer consumer inflation for the month of December, which further extended support to New Zealand’s debt market.

In intraday trading, the yield on the benchmark 10-year bond, which moves inversely to its price, plunged 6 basis points to 3.20 percent, the yield on 7-year note fell nearly 5 basis points to 2.85 percent and the yield on the short-term 2-year note slid 3-1/2 basis points to 2.22 percent.

The Kiwi bonds have been closely following developments in the U.S. debt market. The U.S. benchmark 10-year bond yields fell 6bps to 2.36 percent, following comments by United Kingdom Prime Minister Theresa May on the developments concerning the process of Brexit, which shifted investors toward safe-haven buying, thus pushing bond prices higher.

Moreover, china’s consumer price index came in below market expectations, rising by 2.1 percent y/y in December after 2.3 percent y/y in November; estimates were for 2.2 percent y/y.

In addition, last week, the dairy product prices have fallen at Fonterra's GlobalDairyTrade auction, sliding for a second consecutive auction as whole milk powder prices unexpectedly sank amid increased volume on offer.

The GDT price index fell 3.9 percent to USD3,463, down from USD3,656 at the previous auction two weeks ago. Some 22,396 tonnes of product was sold, edging up from 22,321 tonnes at the previous auction. Whole milk powder dropped 7.7 percent to USD3,294 a tonne.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed 0.35 percent higher at 7,037.58, while at 5:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 38.04 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex