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Bonds up as fiscal cliff remains a focus

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December 17 2012, 08:44AM

Australian three-year bond futures prices are higher on developments in budget talks in the United States.

At 0830 AEDT on Monday, the December 10-year bond futures contract was at 96.760 (implying a yield of 3.240 per cent), up from 96.690 (3.310 per cent) on Friday.

The December three-year bond futures contract was trading at 97.200 (2.800 per cent), up from 97.185 (2.815 per cent).

ANZ head of interest rate research Tony Morriss said developments concerning the US fiscal cliff continued to dominate markets.

"We are getting some signs that Republican leaders are making concessions on the fiscal cliff," he said.

"And we also had some weak CPI (consumer price index) data out in the US.

"That's given us a bit of a bullish tone here."

US leaders are under pressure to agree on a resolution to avert the fiscal cliff - a series of scheduled tax hikes and spending cuts - before the end of 2012.

Over the weekend, Republican speaker John Boehner said he would consider a tax rise for those earning more than $US1 million.

On Friday, official data showed US CPI dropping to an annual rate of 3.7 per cent in November - the lowest since 2008.

An election win for Japan's conservative opposition, the Liberal Democratic Party (LDP), is also significant for markets - as new leader Shinzo Abe is a strong supporter of economic stimulus by the country's central bank, which meets this week.