Aust bonds close firmer
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The Australian bond market has closed a shortened New Year's Eve session firmer with gains most pronounced at the long end of the yield curve.
At the 1230 AEDT close on Monday, the March 10-year bond futures contract was at 96.745 (implying a yield of 3.255 per cent), up from Friday's close of 96.700 (3.300 per cent).
The March three-year bond futures contract was at 97.320 (2.680 per cent), up from 97.290 (2.710 per cent) previously.
The bulk on the gains for Australian bonds came during Friday night's (AEDT) offshore session, with yields and futures contract prices little changed during the local trading day.
RBC Capital Markets fixed income strategist Michael Turner said negotiations over the fiscal cliff, as well as some volume going through at the back of the yield curve, had supported the bond market.
Mr Turner said the volume on 10-year bonds were higher than for the three-years during Friday night's session, which was unusual given trades on the shorter-dated paper usually outnumbered 10-year bonds by about two to one.
"It points to there being a fairly keen buyer at the back end of our market," Mr Turner said.
"We think that was probably behind the move on Friday night, as well as some supportive conditions offshore for bonds."
"Someone obviously had some flow to clear and they were trying to do it in a pretty thin market so they just couldn't help but move the 10-year futures a fair bit."
Negotiations between US president Barack Obama and legislators in the US Congress over the fiscal cliff looked set to go down to the wire.
Talks centred on how to avoid a series of tax hikes and spending cuts, tipped to push the US economy back into recession and have a significant impact on the world economy, coming into effect in early 2013.
The Australian bond market was closed for New Year's Day and was due to resume trade on the morning of Wednesday, January 2, 2013.