Aussie bonds firm after US Fed comments

The Australian bond market is firmer after a voting member of the Federal Reserve argued interest US rates should stay near zero for longer.

US Treasuries rallied after Federal Reserve Bank of Chicago president Charles Evans released a research paper arguing that interest rates should remain near zero for longer amid “substantial uncertainty” about US inflation and employment.

This, is turn, helped 10-year Australian bond futures prices as fixed-income markets bet on the timing of a likely US rate rise in 2015, Bank of New Zealand strategist Kymberly Martin said.

“You could say it had an influence,” she said.

“The bond market is still grappling with its view on where the Fed is going from here.”

Dr Evans, a voting member of the US Federal Reserve’s Federal Open Market Committee in 2015, is considered a dove on interest rates.

“The biggest risk we face today is prematurely engineering restrictive monetary policy conditions,” he wrote in the paper co-written with three researchers.

At 0800 AEDT, the June 2015 10-year bond futures contract was trading at 97.655 (implying a yield of 2.345 per cent), up from 97.615 (2.385 per cent) on Friday.

The June 2015 three-year bond futures contract was at 98.290 (1.710 per cent), up from 98.280 (1.720 per cent).


Government bond and bank bill yields:

* CGS 4.75pct July 2017, 1.764% unchanged from Friday

* CGS 2.75 pct April 2024, 2.323% unchanged

Sydney Futures Exchange prices:

* June 2015 bill futures, 97.880 unchanged

* September 2015 bill futures, 98.010 from 97.990

(*Closes taken at 1630 AEDT previous local session)

Source: IRESS

Dow Futures

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