Bonds level on US rates uncertainty

The bond market is flat despite some support early in the session after a US central bank official urged interest rate rises to be pushed back.

Federal Reserve Bank of Chicago president Charles Evans said in a research paper that interest rates should remain near zero for longer because of “substantial uncertainty” about US inflation and employment growth.

The bond rally was short lived though, as traders are waiting for firmer evidence the US Federal Reserve will push out interest rate hikes, FIIG Securities director of fixed income sales Simon Michell said.

That will come with the US consumer prices index (CPI) for February, the key indicator of inflation, due to be released on Tuesday night.

“The CPI figure will be a bit of a driver because we have seen an increase in inflation expectations in the US,” Mr Michel said.

The market is having some trouble coming to grips with what the Fed will do next, he added.

After recent strong US economic data, the market was expecting the Fed to review its stance and indicate the timing for a rate rise, but the Fed has since said it is not looking to move its interest rate anytime soon.

At 1630 AEDT, the June 2015 10-year bond futures contract was trading at 97.615 (2.385 per cent), level with the previous local close on Friday.

The June 2015 three-year bond futures contract was at 98.270 (1.730 per cent), down from 98.280 (1.720 per cent).


Government bond and bank bill yields:

  • CGS 4.75 pct July 2017, 1.772%, from 1.764% on Friday

  • CGS 2.75 pct April 2024, 2.328%, from 2.323%

Sydney Futures Exchange prices:

  • June 2015 bill futures, 97.890, from 97.880

  • September 2015 bill futures, 98.000 from 97.990

(*Closes taken at 1630 AEDT previous local session)

Source: IRESS


Dow Futures

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