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Bonds higher after RBA rate cut

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SYDNEY, Dec 5 AAP

December 05 2012, 09:01AM

Australian bond futures prices are slightly higher after a rate cut from the Reserve Bank of Australia (RBA) and ahead of national accounts data.

At 0830 AEDT on Wednesday, the December 10-year bond futures contract was at 96.910 (implying a yield of 3.090 per cent), up from 96.900 (3.100 per cent) on Tuesday afternoon.

The December three-year bond futures contract was trading at 97.390 (2.610 per cent), up from 97.380 (2.620 per cent).

Despite a slight rise on Tuesday's RBA decision, bond prices remained fairly subdued ahead of gross domestic product (GDP) numbers, Westpac senior market strategist Damien McColough said.

"I think the market's not going to do too much before the GDP," he said.

A strong data reading could push bonds lower, and generate discussion about the RBA's positioning for early next year, Mr McColough added.

"I think a strong GDP would confuse the market from a sentiment point of view, and the extension of an easing cycle," he said.

"A weak number would certainly keep the market pricing positive.

"How much more the RBA have to do is at the forefront of markets for the next couple of months."

Economists are expecting the GDP figures to show growth of 0.6 per cent in the September quarter, with 3.1 per cent growth for the year to September.