Aust bonds lower on fiscal cliff deal
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Australian bond futures prices have fallen sharply after the US House of Representatives passed legislation preventing a "fiscal cliff" of automatic tax hikes and spending cuts.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.615 (implying a yield of 3.385 per cent), down from 96.745 (3.255 per cent) on Monday.
The March three-year bond futures contract was at 97.200 (2.800 per cent), down from 97.320 (2.680 per cent) previously.
JP Morgan interest rate strategist Sally Auld said bond futures prices opened lower on Wednesday and continued to fall in the lead up to the vote.
"It has been a pretty reasonable sell off, of around 12-13 basis points," Ms Auld said.
"We have pretty much fallen to the bottom of the range we have been in for the past month or so with three-year bonds."
The House passed the legislation, which had already passed the Senate, on Wednesday afternoon (Australian time), ensuring the fiscal cliff measures will not come into effect.
The legislation will raise taxes on households earning more than $US450,000 ($A435,097), but will lock in tax cuts that came in during President George Bush's term of office for most Americans.
It also delays spending cuts for two months, setting the stage for fresh battles between Republicans and Democrats over the coming months.
Ms Auld said the movement of local bond futures would depend on international markets, which will re-open overnight following the New Year's Day holiday.
"But I can't imagine you will get a hugely viscous sell-off because at the end of the day it was a pretty small deal and it feels like Congress still has big issues to deal with over the next couple of months," Ms Auld said.