Canadian bills – Canadian bill prices surged with the implied yield on the December contract at one point falling to 1.37% in the heat of the moment on Thursday. The sustained gains for Canadian credit were directly opposed to the fall in Eurodollar futures meaning that the two curves compressed substantially. The spread between the year-end contracts north and south of the border closed Wednesday at 100 basis points and today has breached that level for the first time since October. The calendar spread narrowed to 88 basis points during the melee. Deferred bill futures advanced harder shaving six basis points off the yield. Government bond yields in Canada are unchanged ahead of lunchtime with the 10-year yield marginally below comparable U.S. debt at 2.94%.
Australian bills – Aussie bill prices wrote-off Wednesday’s threat of further monetary action and rallied sharply. A 12 basis point slide in implied yields came in defiance of Governor Stevens’ delivery in Brisbane midweek in which he said inflation risks were only likely to accelerate over the next few years raising the chances of resumption of monetary tightening. The 10-year bond yield slid by four basis points as Pacific investors realized that monetary tightening was becoming an obsolete threat as sovereign issued weighed heavier.
Japanese bonds – Spurred on by a midweek rally in U.S. treasuries on account of growing weakness in the Greek government and consequent rise in default fears, Japanese bonds jumped again overnight sending the benchmark yield lower by five basis points to 1.105%.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
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