The Australian bond market opened stronger on Tuesday on expectations that the central bank may keep the cash rate on hold for some time.
At 0830 (AEST), the June 10-year bond futures contract was trading at 94.325 (implying a yield of 5.675 per cent), up from 94.315 (5.685 per cent) on Monday.
The Australian bond market closed firmer on Tuesday as investors began considering the outside possibility of interest rate pause by the central bank at its upcoming February board meeting.
At 1630 AEDT, the yield on the Commonwealth Government April 2020 bond was at 5.548 per cent, down from Monday’s close of 5.574, while the yield on the May 2013 bond was at 5.046 per cent, down from 5.053 per cent.
On the Sydney Futures Exchange, the March 10-year bond futures contract was at 94.440, up from Monday’s close of 94.400, while the March three-year bond futures contract was at 94.900, up from 94.870.
FIIG Securities head of strategy and market development Stephen Nash said bonds had rallied as investors reassessed whether the Reserve Bank of Australia (RBA) would continue with its monetary tightening policy when its board next met on February 2.
Fixed interest investment specialist FIIG Securities Ltd has called on the central bank to cut official interest rates by up to two per cent, to avoid an “economic train wreck” in Australia.
FIIG managing director Jim Stening said on Tuesday the risk of overstimulating the economy paled in comparison to what would happen if the Reserve Bank of Australia (RBA) cut rates down too slowly as Australia’s major trading partners went into recession.