Canadian bills – On a data free day the Canadian yield curve simply followed losses apparent across the American curve with implied yields on bill prices gaining a couple of ticks before recovering. The September government bond future fell to its weakest in four days as U.S. treasuries traded softer with the contract slipping to 124.47 by mid-morning in New York to yield 3.05%.
Australian bills – The Reserve Bank sounded awfully dovish in its policy statement announcing a stable short rate of 4.75% at its June meeting. The Bank said that with current rates it expects inflation to return to the 2-3% target band within 12 months and dashed hopes for further interest rate increases. The odds of a rate rise in August now stand at 28% compared to 60% ahead of the decision. The lower likelihood of monetary tightening was reflected in a six basis point increase in bill prices. Yields on shorter-dated government bonds eased in line with that on the two-year falling to 4.82% while 10-year paper declined to 5.23%. The RBA noted that investment intentions by corporations outside of the energy and mining sector were far less optimistic than those within the sector and as such raised risks for the economy.
Japanese bonds – Moody’s Investors Services again warned that the tenuous political climate in the Asian nation was threatening to stall the government’s efforts to prevent an increase in the debt burden. A marginal decline in the participation rate at a 30-year government debt auction unnerved investors sending its yield up by two basis points, although a reversal in the fortunes of the Nikkei 225 index also took the shine off bonds. The 10-year government bond future expiring this month shed 21 pips to 140.72 lifting its yield to 1.16%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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