TR: Aust bonds close stronger, supported by US Treasuries rally
The Australian bond market closed stronger on Wednesday, moving in line with a rally on US Treasuries.
At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 5.701 per cent, down from Tuesday's close of 5.741 per cent, while the yield on the April 2012 bond was at 4.729 per cent, down from 4.768 per cent previously.
On the Sydney Futures Exchange, the March 10-year bond futures contract was at 94.195, up from Tuesday's close of 94.140, while the March three-year bond futures contract was at 94.880, up from 94.830 previously.
The long end of the US Treasury yield curve rallied during offshore trading, helping Australian bonds recover some of Tuesday's steep losses.
There was healthy demand at auction of US Treasury notes, while Wall Street ended broadly flat.
"The five-year auction went a little bit better and that obviously gave US Treasuries a bit of a bid tone and the market was better supported," JP Morgan interest rate strategist Sally Auld said.
"So we saw our market just move a little bit lower in yield overnight and that seems to have continued."
Local bond yields and futures contract prices kept within a tight trading range during most of Wednesday's local session, amid thin trading conditions and a lack of domestic economic data to provide direction.
But the local market managed a late afternoon rally of two to three basis points, moving in line with US Treasury bond futures contracts in after hours dealings.
Ms Auld said market participants were expected to focus on the latest US Treasury note auction due to take place during Wednesday night's (AEDT) offshore session.
"Last night's went reasonably well which would suggest that there is better demand for mid-curve bonds," Ms Auld said.
"Our market will probably move in sympathy with what the US does tonight.
The last of the $US118 billion worth of US Treasury note auctions for the week will feature $US32 billion worth of seven-year US Treasury notes.
Earlier this week, $US44 billion in two-year notes and $US42 billion worth of five-year notes were sold at auction.
US economic data due out during the offshore session included the Institute of Supply Management's purchasing manager's index for Chicago for December.
