Australia's Bonds Slump; Yields Rise Their Most in Five Months
March 29 (Bloomberg) -- Australian government bonds fell, driving yields to their biggest increase in five months, on speculation a U.S. report this week will show quickening jobs growth and fuel rising interest rates across the world.
The Fed has kept rates at a 45-year low of 1 percent since June, citing slow jobs growth. Australian government bonds rallied after a weaker-than-expected gain in U.S. employment last month, with yields on 10-year debt falling 33 basis points in the week after the figures were released on Friday, March 5.
``The market is now looking at the risk that the payrolls number on Friday will show there is finally some employment growth in the U.S.,'' said Warren Hogan, chief economist and head of bond strategy at Credit Suisse First Boston in Sydney. ``The Reserve Bank of Australia is in a tightening cycle, so if U.S. data improves and Australian data remains strong, it raises the chances the bank will raise rates'' in Australia, pushing bonds lower.
The 6.5 percent bond maturing May 2013 fell 1.227, or A$12.27 per A$1,000 face amount, as of 12:33 p.m. in Sydney, to 107.253. The yield rose 16 basis points to 5.48 percent, the highest in almost three weeks and the biggest one-day gain since October. A basis point is 0.01 percentage point.
Australia's 10-year government bonds yield 1.63 percentage points more than U.S. Treasury notes with a similar maturity, compared with 1.48 percentage points on Friday.
The U.S. Labor Department will Friday say the economy added 115,000 jobs in March, the most since December 2000, according to the median forecast of 56 economists surveyed by Bloomberg News.
The last monthly employment report on March 5 showed the economy added 21,000 jobs, less than the 130,000 median forecast.
Australian Dollar
The number of U.S. citizens filing initial claims for jobless benefits totaled 339,000 in the week ended March 20, close to a three-year low, a government report showed on Friday.
Australia's dollar bought 74.54 U.S. cents from 74.65 cents in late New York trading Friday.
The currency fell after some investors speculated its 1 percent rally Friday, gaining the most among 16 major currencies tracked by Bloomberg data, dimmed prospects for a further rise.
``It was a solid session Friday night'' as investors returned to riskier assets such as higher-yielding currencies, said Michael Jansen, a foreign-exchange strategist at National Australia Bank Ltd. Now ``everyone is turning from being investors to traders.''
Three-quarters of the 69 investors, traders and strategists surveyed from Tokyo to New York Friday advised selling or holding the Australian dollar against the U.S. currency this week.
Trade Deficit
The currency may gain on speculation a report tomorrow will show Australia's trade deficit narrowed in February, signaling global economic growth is fueling demand for the country's exports, such as steel, coal and iron ore.
The trade deficit in February was probably A$1.5 billion (S1.12 billion), the narrowest in 11 months, from A$1.96 billion in January, according to the median forecast of 19 economists surveyed by Bloomberg News. Greater demand for Australian goods may drive up the currency used to buy them.
``If it does narrow more than expected, it will probably be due to the export side, which is more positive for the Australian dollar,'' said Greg Gibbs, a Sydney-based senior currency strategist at RBC Capital Markets. |
