Australian bond market weaker on risk appetite increase

The Australian bond market slightly declined on Thursday’s opening after investors’ appetite for riskier assets grew on better global prospects.

The March 10-year bond futures contract price fell from Tuesday’s closing figure of 94.470 (4.530 per cent) to 94.460 (implying a yield of 5.540 per cent) at 0830 AEDT on the ASX 24. The March three-year bond futures contract price, meanwhile, went down from 94.960 (5.040 per cent) to 94.920 (5.080 per cent).

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Noting the overnight tracking of the bonds with the US Treasuries before firming in early morning trade, RBC Capital Markets interest rate strategist Michael Turner said, "The US sold off last night and we followed the general direction of it.

"Ongoing chatter about the EU making changes to their financial stability fund, either increasing the size of it, or allowing it to purchase sovereign debt, supported European peripheral bonds and supported more general risk appetite.

"As a result, bonds were pretty heavy all night. We've certainly followed that move."

Turner was also not surprised at the success of the Portuguese bonds auction held Wednesday as they were offered at a discount. Nevertheless, result of the Portuguese bond auction triggered favourable market reaction with the rise of Wall Street stocks and with the jump of financial shares in anticipation of dividend increase this year.

The market is also looking forward to Australia’s unemployment rate December figures which will be released on Thursday by the Australian Bureau of Statistics (ABS).

Analysts projected 25,000 additional hirings which translate to 5.1 per cent decrease in unemployment for that month.

If market expectations match the ABS figures, Turner does not see any major change in the bond market.