Rising bond yields push shares down

New Zealand shares declined Monday as the yield on government bonds increased after central bankers around the world began to signal they will tighten historically loose monetary policy.

Monday, September 27th 2021, 6:33PM

by BusinessDesk

ASB economist Chris Tennent-Brown said bond yields both in NZ and overseas were climbing after the US Federal Reserve and the Bank of England took a “more hawkish” tone at meetings last week.

“Higher inflation expectations and major central banks shifting towards a reduction in monetary policy accommodation are supporting the broad upswing in government bond yields,” he said.

The yield on a 10-year NZ government bond was sitting just below 2% today, near the highest level seen this year. This higher rate is putting downward pressure on some stocks.

Benchmark equity index, the S&P/NZX 50 fell 31 points, or 0.2%, to 13,227.7 on Monday with $150 million traded through the market.

Synlait Milk had the day’s biggest percentage move, recovering two months of losses as it jumped almost 8% to $3.56.

The sudden improvement comes after the dairy processor reported a 2021 loss of $28.5m but predicted it would return to profitability within the 2022 year.

The 2021 year's earnings were down almost 80% after its biggest customer A2 Milk lost a key export channel due to pandemic-related travel restrictions.

Synlait is cutting its staff by 15% and expects to return to pre-crisis levels of “profitability, operating cash flows, and debt ratios” by the end of financial year 2023.

A2 Milk also saw its share price climb on the upbeat outlook, its shares were up 2.9% at $6.06 today having climbed 10% over the past five days.

Exclusive negotiations between Z Energy and its takeover suitor Ampol were extended by two weeks today as the two companies continue to hammer out a deal.

Z Energy’s board emphasised there was no certainty that an agreement will be reached. It is said to be looking for a higher price than the current $3.78 per share offer and there are a number of regulatory requirements for Ampol to clear.

Shares in the fuel retailer fell 1.2% to $3.39 following the update today, having climbed as high as $3.55 after the takeover bid was announced.

Oceania Healthcare posted the day’s biggest fall, dropping 3.3% to $1.47.

A report by S&P Global Ratings today said air travel’s recovery may be pushed “well into 2022 or later” due to ongoing travel restrictions and “sluggish business travel”.

Despite this warning, local travel stocks almost all finished the day stronger with Air New Zealand up 3.5% at $1.65, Auckland International Airport up 0.5% at $7.78, and Serko 0.7% at $8.15.

Tags: Market Close