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Weak stockmarkets boost Aust bonds

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AAP

2013-02-21

Australian bond futures are stronger following a weak day on equity markets.

At 1630 AEDT on Thursday, the March 10-year bond futures contract was trading at 96.485 (implying a yield of 3.515 per cent), up from 96.440 (3.560 per cent) on Wednesday.

The March three-year bond futures contract was at 97.130 (2.870 per cent), up from 97.090 (2.910 per cent).

Global share markets fell overnight on Wednesday and on Thursday following the release of the minutes from the January meeting of the US Federal Reserve's Federal Open Markets Committee.

The Fed minutes, released during the overnight session, showed that some members expressed concern over its economic stimulus program called quantitative easing (QE).

They were worried that, with an improving US labour market, QE could eventually escalate inflation and unsettle financial markets.

Nomura head of fixed income Jon Linton said the bond market was reacting to weakness in share markets, rather than the Fed minutes.

"We're following equities basically, equities struggled everywhere overnight and that's flowed through to the Asian session," he said.

He said bond traders would be closely watching the performance of equity markets overnight on Thursday.

"I think we might need another day or two of negative equity markets for the bond markets to react," he said.

"Unless we get another weak night of equities tonight then I think bond markets aren't going to be too worried."