Australia Bonds higher on LTRO sentiment
Bonds higher on LTRO sentiment
The Australian bond market has opened higher, driven by sentiment around a key liquidity operation in Europe.
Westpac senior market strategist Damien McColough said that Australian bond prices had performed disappointingly overnight compared to other bond markets, and there likely would not be much movement on Tuesday.
“We’re probably going to be in a low-volume type range today,” he said.
“I wouldn’t expect any strong move outside of last night’s range, particularly for the three-years.”
Mr McColough said a long-term refinancing operation (LTRO) by the European Central Bank due on Wednesday seemed to be shaping global sentiment, but the market was not sure how to interpret possible results.
“The LTRO is the key thing for this week, and people are asking, what does a large subscription or a low subscription mean,” he said.
“If the LTRO amount is less than last time, that could be good, because it means that banks don’t need as many liquidity funds, or it could be bad, because they’re not going to borrow to lend.
“It is a bit of a `wait and see’ scenario at the moment.”
He said that some correlations between currencies and markets had become reversed or changed in anticipation of the operation.
“I think the market is just washing around, waiting to see the interpretation of the LTRO,” he said.
At 0830 AEDT on Tuesday, the March 10-year bond futures contract was trading at 95.940 (implying a yield of 4.060 per cent), slightly up from 95.910 (4.890 per cent) on Monday.
The March three-year bond futures contract was at 96.360 (3.640 per cent), up from 96.320 (3.680 per cent).