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New Zealand Bonds Fall on Quake Cleanup Bill; Kiwi Trades Near 3-Week High
New Zealand’s bonds fell, pushing 10-year yields to the highest in a month, on speculation the government’s finances will worsen as it spends about NZ$2 billion ($1.4 billion) to rebuild after last week’s earthquake.
The so-called kiwi dollar rose to the strongest in three weeks after a better-than-forecast U.S. jobs report boosted investor appetite for growth-sensitive currencies. Australia’s dollar was near a four-week high as the nation’s job advertisements rose. Standard & Poor’s said it may cut the rating on Christchurch City Council and its unit Christchurch City Holdings Ltd. after last week’s temblor.
“The big reaction has been in the bond market, where we’ve seen quite a big sell-off,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “The main concern is the impact on the government’s finances in terms of funding the reconstruction cost.”
The yield on New Zealand’s 6 percent bond due May 2021 rose 13 basis points to 5.41 percent at 6:01 p.m. in Wellington. It earlier touched 5.42 percent, the highest since July 28. A basis point is 0.01 percentage point.
New Zealand’s dollar gained to 72.21 U.S. cents from 72.07 cents in New York on Sept. 3, after earlier touching 72.33, the strongest since Aug. 11. The kiwi fetched 60.93 yen from 60.77 yen. Australia’s dollar traded at 91.70 U.S. cents from 91.66 cents. It reached 91.77 cents, the highest since Aug. 9. The currency was at 77.37 yen from 77.28 yen.
‘Rebuild Job’
Aftershocks hit Christchurch, the nation’s second-biggest city, yesterday and stormy weather placed “significant stress on already damaged buildings,” the government said in a statement.
The government’s initial estimates of NZ$2 billion needed to repair damages from the 7.0 magnitude quake would be equivalent to “around 2 percent” of gross domestic product, said Craig Ebert, a senior economist at the Bank of New Zealand.
“There’s a major rebuild job here in Christchurch,” New Zealand Prime Minister John Key said in a television interview yesterday. “You can see the superficial damage. A lot of homeowners will, over time, find damage that they’re not expecting.”
S&P is monitoring the impact of the quake on Christchurch’s assets and operations, it said in a statement. The rating is currently AA+ and any downgrade is not likely to be more than one notch, S&P said.
The New Zealand and Australian dollars were supported as U.S. Labor Department figures on Sept. 3 showed private payrolls climbed 67,000 last month, after a revised 107,000 increase in July.
‘Risk Seeking’
“The report immediately triggered a bout of risk seeking,” Gareth Berry, a currency strategist in Singapore at UBS AG, wrote in a research note on the U.S. jobs data. “The Australian, New Zealand and Canadian dollars all gained against the U.S. dollar.”
Initial claims for U.S. unemployment benefits dropped to 470,000 last week from 472,000 in the previous week, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department’s data on Sept. 9.
Australia’s jobs advertised in newspapers and on the Internet gained 2.6 percent from July, when they rose a revised 1.4 percent, according to an Australia & New Zealand Banking Group Ltd. report released today.
The Reserve Bank of Australia is forecast to keep its benchmark interest rate at 4.5 percent for a fourth month tomorrow, according to all 25 economists in a Bloomberg News survey.
Australian government bonds fell. The yield on the 4.5 percent bond due April 2020 rose nine basis points to 4.93 percent, according to Bloomberg data. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.83 percent.
To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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