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AAP

2013-02-25

Australian bond futures prices are firmer after consolidating gains made during offshore trading, in response to Britain losing its coveted AAA sovereign debt rating.

At 1630 AEDT on Monday, the March 10-year bond futures contract was trading at 96.525 (implying a yield of 3.475 per cent), up from Friday's close of 96.485 (3.515 per cent).

The March three-year bond futures contract was at 97.140 (2.860 per cent), up from 97.100 (2.900 per cent) previously.

The local bond market opened firmer, tracking the move on US Treasuries during weekend offshore trading, as investors sought save-haven assets after a decision by Moody's to strip the United Kingdom of its AAA credit rating.

After the initial move, bond futures contract prices traded within a tight range, with little to offer market players direction during the local trading day on Monday.

Westpac senior market strategist Damien McColough said the next big event for bonds was the Australian Bureau of Statistics' capital expenditure figures (capex) for the December quarter on Thursday.

"It all depends on the capex data for real domestic price impetus this week," Mr McColough said.

"A bit of repricing overnight and then consolidating during the day is really what I think is ahead of us over the next couple of days."

Mr McColough said the capex data would have a large bearing on the prospects of an interest rate cut by the Reserve Bank of Australia (RBA) at its next monthly board meeting on March 5.

A stronger capex report would suggest the central bank was likely to keep interest rates on hold for the foreseeable future, he said.

However, weak data, particularly in the non-business sector, raised the possibility of a rate cut in March, Mr McColough said.

The RBA kept the cash rate unchanged at three per cent in February.