Aussie bonds weaken as rally undone

The Australian bond market is weaker as the rally in US Treasuries is reversed.

Fixed-income assets rallied on Thursday after the US Federal Reserve indicated it might be slower to raise interest rates than previously expected.

But some of that rally was unwound by Friday morning, with 10-year Australian futures prices following the direction of US Treasuries, as financial markets took the view rates would still rise, St George senior economist Janu Chan said.

“It was the extent of the reaction initially,” she said.

“The US Fed is still looking like it will raise rates, it’s just that it might be a little bit more gradual.”

The US dollar also recovered from a heavy sell-off, pushing the Australian dollar back below 77 US cents.

At 0830 AEDT, the June 2015 10-year bond futures contract was trading at 97.625 (implying a yield of 2.375 per cent), down from 97.655 (2.345 per cent) on Thursday.

The June 2015 three-year bond futures contract was at 98.240 (1.760 per cent), down from 98.250 (1.750 per cent).


Government bond and bank bill yields:

* CGS 4.75pct July 2017, 1.778% unchanged from Thursday

* CGS 2.75 pct April 2024, 2.286% unchanged

Sydney Futures Exchange prices:

* June 2015 bill futures, 97.860 from 97.870

* September 2015 bill futures, 97.960 from 97.980

(*Closes taken at 1630 AEDT previous local session)

Source: IRESS

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