Aust bonds close firmer
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The Australian bond market has closed firmer, with investors drawn to fixed-income assets as the prospects of a resolution to the US fiscal cliff appear to fade.
At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.700 (implying a yield of 3.3 per cent), up from Thursday's local close of 96.680 (3.320 per cent).
The March three-year bond futures contract was at 97.290 (2.71 per cent), up from 97.280 (2.720 per cent) previously.
The Australian bond market rallied during overnight offshore trading to open firmer, with the bulk of the gains at the long end of the yield curve.
Bonds gave back some of those gains during the local session, given a positive day on equity markets, but still managed to end the day firmer in quiet trading conditions.
Commonwealth Bank interest rate strategist Phillip Brown said fading hopes of a deal being struck between US President Barack Obama and legislators in Congress over the looming budget deadline prompted a slight rally for bonds.
"The fiscal cliff is getting very close, the fiscal cliff deal is getting no closer at all," Mr Brown said.
"I think that is the main reason."
The move was most pronounced for the long dated bonds, while three-year yields and futures contract prices were little changed throughout the day in quiet trading conditions.
The fiscal cliff referred to a series of tax hikes and spending cuts in the US due to come into effect in early 2013.
Unless the parties were able to come to an agreement, the measures were expected to push the US back into recession and possibly trigger a downgrade from the global credit ratings agencies.
It would also have a significant knock-on impact on the global economy.