Australian bonds are generating the strongest demand in three years on speculation the central bank will win room to hold record-low interest rates as Treasurer Joe Hockey’s first budget focuses on deficit reduction.
Australian government bonds will outperform U.S. peers in the coming eight months, shrinking the yield premium offered by benchmark notes to the least since 2006, as growth prospects for the two nations diverge.
Treasury 10-year note yields rose to 3 percent for the first time in two years as a strengthening U.S. employment market increases speculation the Federal Reserve will announce plans to slow its bond-buying program this month.
Standard & Poor’s decision to strip Western Australia state of its AAA credit rating may act as a warning to Prime Minister Tony Abbott as he assumes stewardship of a national budget that’s been in deficit for five years.
Australian bond yields tumbled to the lowest level in 20 months relative to U.S. Treasuries after central bank Governor Glenn Stevens indicated he’s willing to cut the developed world’s highest benchmark interest rate.
The euro climbed against the yen and the dollar on speculation European Central Bank President Jean- Claude Trichet will signal today that policy makers intend to raise interest rates as soon as next month.
The Australian and New Zealand dollars fell for the first time in three days as concern a loan plan of almost $1 trillion won’t end the euro zone’s fiscal crisis discouraged demand for higher-yielding assets.