Australian bonds open firmer on strength of US Treasuries

Monday sees a stronger Australian bond market as it tracked Friday night’s rebound of the US Treasuries.

The ASX 24 at 0830 AEDT reflected increase on the March 10-year bond futures contract from Friday’s closing figure of 94.365 (5.635 per cent) to 94.400 (implying a yield of 5.600 per cent).

The March three-year bond futures contract also rose from 94.700 (5.300 per cent) to 94.740 (5.260 per cent).

Michael Turner, RBC Capital Markets fixed income strategist, noted that the Australian bond tracked the overnight rebound of the US Treasuries market on Friday and he perceived such trend to continue through out the week.

Turner noted, "We were about four, four and a half basis points firmer on Friday night in line with the US but there's not a whole lot on the calendar this week - at least today - that suggests we're going to do anything except follow the US again."

Owing to the “thin conditions in a fairly quiet pre-Christmas market,” Turner pointed out that “most movers tend to be a bit exaggerated” and this render the prices sensitive to slight triggers.

Moody’s sharp downgrading of Ireland’s credit rating on Friday had weighed down both the Euro and Sterling and lightly buoyed the dollar.

However, Turner felt that the summit on the crisis held by the EU leaders actually focused more on bond market issues. He claimed, "That impacted a tiny bit. I think it's more just a fairly broad rally across most of these income markets. A lot of it was in response to the perceived lack of action from the EU at the end of the two-day summit on Friday."