Bonds end firmer as traders shun risk
Market watch top headlines
Australian reports
- Aust markets: Stocks end higher on jobs surge
- Aust dollar report: $A reaches four-month high on jobs data
- Aust credit close: Bonds mixed after Japanese auction
World reports
- World commodities: Crude oil prices fall
- World markets: Wall St lower on European debt fears
AAP
2009-11-20
The Australian bond market closed firmer on Friday after risk-averse investors snapped up debt futures contracts as equities markets fell.
At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 5.394 per cent, down from Thursday's close of 5.412 per cent, while the yield on the April 2012 bond was at 4.761, down from 4.827 per cent previously.
On the Sydney Futures Exchange, the December 10-year bond futures contract was at 94.585, up from Thursday's close of 94.565, while the December three-year bond futures contract was at 95.140, up from 95.080 previously.
Commonwealth Bank interest rate strategist Jarrod Kerr said a spike in risk aversion over the past few weeks was accentuated in overnight trade on Thursday, following a fall in equities.
"We really did see a pile of money flowing into bonds," he said.
"What's interesting is we've seen money flow both into nominal and inflation-protected bonds so your real yields are being absolutely crushed in this environment."
Inflationary expectations were holding, not rising, while nominal yields were being put under pressure, he said.
"There are growing concerns over the equity markets and also corporate and agency bonds and into treasuries, so there's been a bit of a safe haven flow there."
Local bonds rebounded in the afternoon after an early morning sell off, despite no significant data released on Friday.
"People are looking for it to go higher.
"There were a number of people looking to sell bond futures at these sorts of levels so it's just being squeezed higher."
The Australian stock market ended the week lower, after falls across the board following losses on Wall Street and commodity markets.
The benchmark S&P/ASX200 index closed down 63.4 points, or 1.33 per cent, at 4,685.8 points, while the broader All Ordinaries index lost 61.1 points, or 1.28 per cent, to 4,706.7 points.
Mr Kerr said the Friday offshore session would be dependent on equity markets.
"We might see a bit of a sell-off in bonds, particularly given the US treasury is issuing $US118 billion in bonds next week, so we could see a sell off into those options and a rally like we have seen in previous auction weeks."
He predicted a sell-off in bond futures leading into domestic capital expenditure survey results on November 26.
"That should ensure a decent uptake in expectations over the next financial year."
