New Zealand’s 10-year bond yields close tad lower as dairy prices recover slightly at GDT auction

The New Zealand 10-year bond yields closed tad lower Wednesday after international dairy prices improved slightly at the Global Dairy Trade (GDT) auction.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1 basis point to 2.645 percent, the yield on 7-year note ended 1/2 basis point higher at 2.308 percent and the yield on short-term 2-year note remained steady at 1.980 percent.

New Zealand’s Global Dairy Trade (GDT) price index improved 1.4 percent at the latest price auction, from an unexpected 3.0 decline previously. Also, average milk price rose to USD 2,965 per metric tonne, compared to prior USD 2,880 per metric tonne.

On Tuesday, New Zealand’s third-quarter consumer inflation rose by 0.2 percent, higher than the market expectations of flat outcome, from up 0.4 percent in the previous quarter. On an annual basis, inflation dropped to 0.2 percent, the eighth straight quarter below 1 percent. However, we foresee that today's inflation reading was not far from the central bank's expectation, and will not stand in the way of it cutting the official cash rate again in November.

Moreover, the Reserve Bank had forecast a 0.1 percent increase in its August Monetary Policy Statement. The annual inflation rate slowed from 0.4 percent to 0.2 percent, just above the record low of 0.1 percent that it briefly touched in December last year, reported Westpac in its Research note.

Meanwhile, the New Zealand’s benchmark S&P/NZX50 Index closed up 3.45 points to 6,976.54.