SYDNEY, March 15 (Reuters) - Australian three-year bond
futures dipped to a one-week low on Monday, implying yields of
nearly 0.3%, as investors feared a stellar economic recovery
would rekindle inflation and spur interest rate hikes.
A global bonds sell-off gathered momentum last month on
worries massive U.S. fiscal stimulus and pent-up consumer demand
would flare inflation with expanding vaccination campaigns
expected to bring an end to lockdowns.
In Australia, the country's central bank responded last week
by doubling the fee it charges for lending out April 2023 and
April 2024 government bonds. Moreover, Reserve Bank of Australia
(RBA) Governor Philip Lowe also forcefully pushed back on market
pricing for rate hikes.
While that did calm the market, bond yields have again
resumed their upward trek.
"Looking ahead, and despite the recent RBA tweaks... we
believe there is still some value in holding a short position,"
said Robert Thompson, a Sydney-based rates strategist at RBC.
"The RBA's tweaks have certainly reduced the outright yields
on Apr-23s and Apr-24s, but it hasn't shifted overall basket
repo rates enough to completely get rid of the arbitrage,"
"At very least, the change in pricing probably hasn't forced
stop-outs, although it may see some choosing to take their
The spike in bond yields did little to push the Australian
dollar higher which was down for a second straight
session at $0.7747, drifting away from a three-high high atop 80
U.S. cents touched late last month.
Nomura's rates strategist Andrew Ticehurst said he was
"positive on the AUD" driven by stronger U.S. equities, a weaker
U.S. dollar and impressive domestic data.
Ticehurst expects a "less dovish tilt" from the RBA around
Earlier in the day, RBA Governor Lowe emphasised Australia's
A$2 trillion economy still has a long way to go despite recent
better-than-expected data, reiterating policy settings will be
maintained for as long as is needed.
The New Zealand dollar was up 0.3% at $0.7196,
still far away from a 3-1/2-year high of $0.7463 seen last
The kiwi has drifted away from a recent trough at $0.7100,
which now marks strong support.
New Zealand government bonds fell with yields
11-12 basis points higher at the long end of the curve.
In Australia, the three-year government bond futures
contract fell sharply to 99.706 from Friday's close of
99.764 while the 10-year contract fell 8 ticks to
(Editing by Lincoln Feast)