Canadian bills – Bill prices dipped lower but by less than Eurodollar futures. With a blank economic calendar for the day trading was light in morning trading. Government bond futures were ahead buy eight ticks although the yield on the cash 10-year bond added one basis point to 3.01% maintaining a minor premium over U.S. notes.
Australian bills – Both remaining three-month September and December bill futures now yield below 5% as investors remain doubtful over any further RBA action for the remainder of the year. The curve has now flattened substantially with the 10-year government bond today rebounding off its lowest yield point for this year adding two basis points to 5.18%.
Japanese bonds – Japanese yields nudged ahead by one basis point to 1.13% ahead of Tuesday’s Bank of Japan statement at the end of its two-day policy meeting. The Nikkei newspaper ran a story suggesting the Bank might initiate a new lending program to help companies who don’t have real estate to collateralize borrowings. The central bank has to consider whether to add fresh liquidity to the economy and received a prod in the back in the form of unexpected weakness in the April machinery orders report. Today data indicated that capital orders failed to rebound that month after the tsunami and earthquake during March. Orders are a good forward looking gauge of capital spending and a 3.3% monthly drop is not what the Bank will want to see.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.