Bonds open soft with lack of strong leads

The Australian bond market opens softer Tuesday with the prevailing thin trading volumes brought by the holiday season.

As of 0830 AEDT on the ASX 24, the March 10-year bond futures contract went down to 94.405 (implying a yield of 5.595 per cent) from Monday’s closing figure of 94.430 (5.570 per cent) while the March three-year bond futures contract went down to 94.700 (5.300 per cent) from 94.730 (5.270 per cent).

Economist Stephen Roberts of Nomura Australia Ltd. noted the volatility of Australian bonds as they continue to follow fluctuations in the US market.

Robert commented, "US 10 year Treasuries finished where they started.

"They rallied overnight and then the Fed came in with the usual purchases and sold off after that.

"The trading volumes are thinner over the holiday season."

After the quenching of tensions on the Korean peninsula with North Korea’s startling indifference on South Korea’s conduct of artillery drill, the Australian market received positive offshore trading leads.

Apart from that, Austalian and European investors were left with no definite leads as relatively calm trading prevails during the holiday season.

A case in point is Roberts comment that there were no important data releases that would drive markets on Tuesday.

Monday's wavering in the US markets actually reflects the waning of momentum driven earlier by the signing of President Obama’s tax-cut package that resulted to three consecutive weeks of market gains.