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AAP

2013-01-22

Australian bond futures prices are little changed, despite the announcement of new stimulus measures in Japan.

JP Morgan interest rate strategist Sally Auld said it had been a largely quiet day on the local bond market, due to a lack of liquidity following the Martin Luther King public holiday in the US.

She said futures sold off after the Bank of Japan announced the stimulus measures but prices soon rallied back.

"We saw the knee-jerk reaction was risk-on with the Aussie dollar up and bond yields higher (prices lower) but then people looked at the detail and saw it was less aggressive than they thought it was going to be," she said.

"So bonds have rallied back and we are pretty much where we were before the announcement."

The Bank of Japan on Tuesday announced a new two per cent inflation target and said it would conduct "open-ended" asset purchases to help achieve the goal of breaking out of a long spell of deflation.

Ms Auld said the key local event for the market on Wednesday would be the release of official inflation figures for the December quarter.

She said the market was likely to rally if inflation came in weaker than expected but would move little if the figure came in close to expectations.

AAP's survey of 15 economists on Monday revealed a median forecast for 0.5 per cent headline inflation for the quarter.

At 1630 AEDT on Tuesday, the March 10-year bond futures contract was trading at 96.665 (implying a yield of 3.335 per cent), unchanged from Monday.

But the March three-year bond futures contract was at 97.230 (implying a yield of 2.770 per cent), down from 97.240 (2.760 per cent).