Bonds down on RBA comments
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The Australian bond market has weakened, as commentary from the Reserve Bank of Australia (RBA) reveals a more positive view of the domestic and global economies.
At 1630 AEDT on Tuesday, the December 10-year bond futures contract was at 96.920 (implying a yield of 3.080 per cent), down from 96.990 (3.010 per cent) at Monday's local close.
The December three-year bond futures contract was trading at 97.400 (2.600 per cent), down from 97.460 (2.540 per cent).
CMC markets chief market strategist Michael McCarthy said the fall in prices was not unexpected, given the more optimistic language used in the minutes of the RBA's November 6 meeting.
"The reaction in bond markets is in line with what I would expect from the meeting minutes," he said.
"While the board said they felt the need for further accommodation in the next few months, they pointed to several factors that had shifted - firstly their view on the international situation was more pro-growth than it has been in the past, suggesting that both China and the US are stable and growing.
"They pointed to a surprise in the higher reading on inflation. We knew they were going to look through the effects of the carbon tax - so they're clearly saying that in spite of that one off impact, the core inflation rate is still of concern."
Mr McCarthy said the RBA had also noted that previous rate cuts were starting to affect the economy, and that it wanted to wait and see if further impact would be felt.
With few other events on the domestic front this week, and with the US closed for Thanksgiving, there was not likely to be much movement in bond prices this week, Mr McCarthy said, although negative developments in Europe could still have an impact.