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Bonds up on capex, rate cut expectation

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AAP

2012-11-30

Australian bond futures prices are higher, driven by renewed expectations of a central bank rate cut.

At 1630 AEDT on Friday, the December 10-year bond futures contract was at 96.915 (implying a yield of 3.085 per cent), up from 96.860 (3.140 per cent) on Thursday.

The December three-year bond futures contract was trading at 97.380 (2.620 per cent), up from 97.330 (2.670 per cent).

Nomura rates strategist Martin Whetton said bonds had continued to rise after a weak reading for capital expenditure on Thursday.

"We're a lot higher today - it's just continuing on from yesterday, because there's nothing going on offshore," he said.

Capital expenditure numbers on Thursday showed mining companies slashing their spending plans for the current financial year by 8.1 per cent, or $9.6 billion.

The private sector overall planned to cut its capital expenditure by $5.9 billion or 3.3 per cent compared to three months ago - the biggest such revision in the survey's history.

Mr Whetton said this had fuelled a rise in the expectation that the Reserve Bank of Australia (RBA) would cut the cash rate at its board meeting next week.

The cash rate is currently 3.25 per cent, after the RBA elected not to cut at its meeting on November 6.