Bonds mixed on fiscal cliff concerns

Australian bond futures prices are mixed on concerns about United States budget negotiations.

At 0830 AEDT on Tuesday, the March 10-year bond futures contract was at 96.685 (implying a yield of 3.315 per cent), up from 96.670 (3.330 per cent) on Monday.

The March three-year bond futures contract was trading at 97.220 (2.780 per cent), down from 97.235 (2.765 per cent).

Commonwealth Bank interest rate strategist Phillip Brown said the US fiscal cliff was still a focal point for markets, with Republican speaker John Boehner suggesting a deal could be reached.

"The US markets got quite excited by some statements from Boehner and the fact that he might be prepared to raise tax rates on richer people," he said.

"Perhaps that seems like a no-brainer, given how low their deficit is and how their tax rates are - but at least there's some movement.

"The US market responded well to this, with their equities up, and bonds selling off."

The term fiscal cliff refers to a series of tax hikes and spending cuts which are due to begin early next year, which could push the economy back into recession.

Mr Brown said that raising the debt ceiling was just as important for the US economy.

"They could end up with a small agreement on the cliff, and then a bigger problem with the debt ceiling next year," he said.

The release of minutes from the Reserve Bank of Australia's December 4 meeting, to be released on Tuesday, could be significant for markets, he added.

"There's moderate pricing for another rate cut, but I don't expect much of a hint from them," he said.

"If we got a big sign from the RBA, we could get a bit of a rally."

The RBA cut the cash rate by 0.25 per cent to 3.00 per cent at its December 4 meeting.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9328-0.0004-0.05%
    AUDUSD=X
    0.5556+0.0002+0.03%
    AUDGBP=X
    0.6753-0.0002-0.02%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg