• New Zealand bonds plunge at close despite u.s.-china trade tussle, hopes of tad lower Q1 2018 GDP

    Source: FxWire Pro - Commentary / 20 Jun 2018 02:49:23   America/New_York

    New Zealand bonds closed Wednesday’s session on a sharply higher note even as the United States counterpart plunged overnight, tracking a trade tussle with China over the imposition of tariffs on aluminium and steel goods. Also, investors are now eyeing the country’s gross domestic product (GDP) data for the first quarter of this year, expected to come in tad lower at 0.5 percent, from previous 0.6 percent, due to be released on June 21 by 22:45GMT.

    At the time of closing, the yield on the benchmark 10-year note, which moves inversely to its price, jumped 3-1/2 basis points to 2.91 percent, the yield on the long-term 20-year note surged nearly 4 basis points to 3.23 percent and the yield on short-term 2-year closed 1-1/2 basis points higher at 1.90 percent.

    Lower UST yields and a rather flattish JPY seen overnight suggest that there were some buying into safe haven assets as well, though the stronger dollar depressed greenback-dominated commodity prices.

    U.S. Treasury yields retreated on Tuesday as trade tensions between China and the United States intensified after President Donald Trump threatened to impose a10 percent tariff on $200 billion of Chinese goods while Beijing warned it would fight back.

    New Zealand's current account deficit widened slightly to 2.8 percent of GDP in the year to March. While this was the largest deficit in two years, it remains low relative to history. The result was in line with expectations, and has no implications for our other economic forecasts.

    In seasonally adjusted terms, the quarterly deficit increased substantially in March, reaching just over $3 billion – the biggest in nine years. The main factor was a widening in the trade deficit for goods. The value of exports fell by 5.9 percent, while imports rose by 2.4 percent.

    Meanwhile, the NZX 50 index closed 0.48 percent higher at 8,905.79, while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at -11.84 (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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