New Zealand bonds tad higher on short covering; investors eye GDT price auction

The New Zealand government bonds traded a tad higher Monday as investors covered previous short positions. Also, market participants are awaiting the GlobalDairyTrade (GDT) price auction, scheduled to be held on March 7 for further direction in the bond market.

The yield on the benchmark 10-year bond, which moves inversely to its price fell 1 basis point to 3.32 percent at the time of closing, the yield on 7-year note pushed lower by nearly 1 basis point to 2.88 percent and the yield on short-term 2-year note also traded 1 basis point lower at 2.19 percent.

Dairy prices fell 3.2 percent in the latest GlobalDairyTrade auction held last week, following modest rises in the previous two auctions. Within last night’s move, whole milk powder prices declined 3.7 percent to USD3,189/MT, the lowest level since Oct 2016, although prices are still 55 percent higher than mid-2016.

The NZ bonds have been closely following developments in oil markets because of their impact on inflation expectations. The International benchmark Brent futures moved lower by 0.36 percent to USD55.70 and West Texas Intermediate (WTI) fell 0.43 percent to USD53.10 by 05:00 GMT.

Meanwhile, the New Zealand’s benchmark S&P/NZX 50 Index closed 0.25 percent higher at 7,178.74.