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New Zealand government bonds closed a tad lower in a quiet Tuesday trading session, although rising U.S. Treasury yields dragged the bonds prices lower. In addition, investors moved away from the safe-haven buying following rebound in the stocks prices.
At the time of closing, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.97 percent, the yield on 20-year note also climbed 1 basis point to 3.52 percent and the yield on short-term 2-year ended 1 basis point higher at 2.06 percent.
The latest poor Chinese economic data did not show any impact on the bonds movement, given that China is New Zealand’s top trading partner. Data on Tuesday showed that the country's fixed asset investment growth between January and October slowed to 7.3 percent, below the 7.4 percent forecast in a Reuters poll. China’s retail sales rose 10 percent on the year in October, while industrial output grew 6.2 percent. Industrial output, for its part, increased 6.2 percent that month, a touch below the 6.3 percent forecast.
On the other hand, U.S. Treasury two-year note yields hit a fresh nine-year high overnight as the yield curve resumed its flattening and investors priced in a 25 basis point interest rate hike by the Federal Reserve in December. A flat yield curve suggests the Fed was on course to hike interest rates, while tepid inflation should cap longer-dated yields, Reuters reported.
The yield gap between shorter-dated and longer-dated Treasuries shrank on Monday, with the spread between five-year and 30-year yields at 80.70 basis points. The spread between U.S. two-year note yields and U.S. 10-year notes also contracted to 71.70 basis points.
Meanwhile, the NZX 50 index closed 0.40 percent lower at 8,008, while at 05:00GMT, the FxWirePro's Hourly NZD Strength Index remained highly bearish at -169.82 (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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