Aust bonds mixed after weak retail data
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Australian three-year bond futures prices are higher after weaker-than-expected retail trade figures left scope for more interest rate cuts.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.500 (implying a yield of 3.500 per cent), down from 96.530 (3.470 per cent) on Tuesday.
The March three-year bond futures contract was at 97.160 (2.840 per cent), up from 97.150 (2.850 per cent).
CMC Markets chief market strategist Michael McCarthy said local bond markets reacted sharply to news that Australian retail spending fell for the third consecutive month in December.
Australian Bureau of Statistics showed a 0.2 per cent drop in retail trade in December, which was below market expectations of a 0.3 per cent rise.
"I'd be very surprised if the Reserve Bank took that as major evidence or as game-changing evidence for the need for a rate cut, but I note that the market has," Mr McCarthy said.
"There's clearly still a focus on that potential for a rate cut and that's got the short-end (three-year bonds) a little bit concerned."
Mr McCarthy said 10-year bond futures prices rose on the back of better hopes for Australia's growth prospects as the global economy improves.
"That reflects the reality of the situation that growth is coming through and that the risks for inflation are now starting to shift to the upside," he said.
Mr McCarthy expects both three-year and 10-year bond futures prices to flatten ahead of Thursday's Sydney session, with the shorter-term bonds to give up a lot of Wednesday's gains.