Bonds stronger as global worries re-emerge
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Australian bond futures prices have hit fresh all-time highs as worries about the euro zone government debt crisis re-emerged.
Over the weekend, Spanish bond yields soared past seven per cent, the mark which is considered too high to be sustainable.
UBS interest rate strategist Matthew Johnson said traders are moving away from risker investments.
"Equities are doing quite badly and this seems like an offshore phenomenon, financials are really underperforming recently," he said.
"So the equities market had been weak and that has encouraged a bit of bond buying.
Mr Johnson said the Australian bond market is also being helped by a rally in US Treasury bonds that was believed to be sparked after the President of the Reserve Bank of San Francisco John Williams said the unemployment rate would not drop unless the US Federal Reserve took action.
"So I guess that bonds are rallying because people feel like the Fed is going to ease monetary policy," Mr Johnson said.
At 1630 AEST on Monday, the September 10-year bond futures contract was trading at 97.305 (implying a yield of 2.695 per cent), up from 97.180 (2.820 per cent) on Friday.
The September three-year bond futures contract was at 97.900 (2.100 per cent), up from 97.760 (2.240 per cent).
Mr Johnson said market players will be keenly listening to a speech in Sydney on Tuesday by Reserve Bank of Australia (RBA) governor Glenn Stevens, which is entitled: The Lucky Country.
"I guess that Stevens is going to emphasise that we're in pretty good shape at the moment and the RBA is not focused on second quarter CPI (consumer price index)," Mr Johnson said.
"They're more focused on the evolution of demand and want to wait to see what 75 basis points (0.75 per cent) of interest rate cuts (in May and June) means for demand."