SYDNEY, Oct 15 (Reuters) - The Australian dollar slipped and
bonds rallied on Thursday after the country's central bank
stoked speculation of a near-term cut in interest rates while
hinting it may buy more longer-dated government debt.
The Aussie eased 0.3% to $0.7138, taking it further
away from last week's top of $0.7243 and nearer support around
$0.7125 and $0.7094.
The New Zealand dollar was steadier at $0.6654,
where it has been for much of this week.
The big move was in Aussie government bonds where 10-year
futures jumped 8 ticks to 99.2400, their highest since
early April and a clear break of major resistance at 99.1800.
The rally came after Reserve Bank of Australia (RBA)
Governor Philip Lowe noted that 10-year yields were among the
highest in the developed world and it was worth considering
whether buying the debt in the market would bring those down.
While the central bank has been a regular purchaser of
short-term debt, it has shunned the long end.
"It is also likely the RBA will announce their intention to
purchase more bonds in the 5-10 year part of the curve," said
CBA economist Kristina Clifton.
"Lower bond yields will have the first round effect of
reducing interest costs for the government as they continue to
provide a massive amount of fiscal support to the economy."
Lowe also said further policy easing would have more impact
now that coronavirus restrictions were being eased across much
of the country.
"We see the RBA lowering the cash rate target, term funding
facility rate and three year bond yield target to 0.10% in
November," said Clifton at CBA. Rates are currently at 0.25%.
The market has already largely priced in such a shift, with
three-year yields at 0.14% and November bank bill
futures at 99.920, implying a rate of just 0.08%.
The need for further stimulus was underlined by data showing
29,500 jobs were lost in October while the unemployment rate
rose a tick to 6.9%.
Lowe earlier emphasised that creating jobs was the number
one priority of both monetary and fiscal policy, and the central
bank stood ready to do all it could to help.
Also weighing on the Aussie were more reports that Chinese
importers were deferring purchases of Australian coal amid trade
tensions between the two countries.
(Reporting by Wayne Cole; Editing by Sam Holmes)