Trading Room home page

Bonds rise on fiscal cliff stalemate

Market watch top headlines

Australian reports

World reports

Stocks to watch

AGO, BHP, FMG, RIO, AMP, AZJ, GFF, QAN, TPI, TWE,

SYDNEY, Dec 24 AAP

December 24 2012, 08:55AM

Australian bond futures prices are higher as the likelihood of a deal being reached in the United States to avoid a package of tax hikes and spending cuts become more remote.

At 0831 AEDT on Monday, the March 10-year bond futures contract was at 96.705 (implying a yield of 3.295 per cent), up from 96.695 (3.005 per cent) at Friday's close.

The March three-year bond futures contract was trading at 97.280 (2.720 per cent), unchanged from Friday.

ANZ head of interest rate research Tony Morriss said bond prices edged higher over the weekend after the US House of Representatives rejected a plan to raise taxes for those earning more than $1 million.

"There was supposed to be a vote on Friday, but it was cancelled, and a decision will be delayed until after Christmas," he said.

"That's been a positive for bond markets, and I expect there will be some year-end demand for US Treasuries as well."

Mr Morriss said an announcement from the Bank of Japan that it was reviewing its inflation targets had also been positive for bond prices, as it suggested the Bank was willing to stimulate the market, following the election of a pro-stimulus government.

"There's some scope for quantitative easing there," he said.