Australian bonds open firmer as market expects release of RBA minutes
The Australian bond market fired off with a steady pace on Tuesday following mixed signals from the US and as the market awaits the release of Reserve Bank of Australia (RBA) minutes on the same day.
As of 0830 AEST, the yield on the Commonwealth Government April 2020 bond was 5.378 percent, declining a bit from Friday's close of 5.405 percent while the May 2013 bond slid to 4.758 percent, coming from 4.769 percent.
On the other hand, the Sydney Future Exchange saw some upward swings with the June 10-year bond futures contract gaining at 94.645 from Friday's close of 94.600 while the June three-year contract jumped to 95.170, coming from 95.160.
ANZ's interest rate strategist Tony Morriss said that the overnight session the day before was messy, owing to the roll-over of the bill future contracts as he added that considering the market performance and the data available prior to the holiday, "there is still likely to be some downside pressure, although it was a mixed session in the US overnight."
Mr Morriss noted that stock gains were pared while the value demand for bonds were unwound as he stressed that "the late weakness in stocks may provide a little bit of support and limit any downside damage for our bond market first thing this morning."
US stocks tumbled during the closing hour of trading on Monday as investors succumb to doubts on Europe's economic health, with the Dow Jones industrial average dumping its early gain of 118 points to close down at 20.18.
Analysts are anticipating the release of the June RBA board meeting to look for some clues on whether the board still regards the European debt risks as still significant though Mr Morriss believed that the minutes should hardly provide any clear hints.
He said that local market's temporary fixation on the RBA minutes could be all for naught as the document's statements were usually brief and there were not that much to be learned but "I'd expect to still see from those minutes a continued mild tightening bias even though the bank is likely to remain on hold."