Bonds lifted on residual Eurozone fears

Australian bills – Fascination with the Aussie yield curve continued after the Reserve Bank provoked fears that its earlier growth estimates may have been a little on the high side. Investors continue to fret that the next move for Australian monetary policy might be downwards in light of further contraction in the service sector and fears that Chinese authorities might strike to combat inflation as soon as this weekend. A Beijing newspaper forewarned that the central bank might lift interest rates after hours on Friday further dampening domestic demand across Australia’s biggest buyer. The implied yield on bill futures dropped by five basis points as dealers bet that the central bank is heading towards dropping rates. The benchmark government bond yield slid by as much to close yielding 5.17%.

Canadian bills – The Canadian curve flattened by a couple of basis points on Tuesday with sellers driving the implied yield on 2011 contracts marginally higher as buyers drove down implied yields across later contracts. Government bond futures fell by 13 ticks adding one pip to the 10-year yield at 3.08%, which remained five basis points cheaper than comparable U.S. Treasuries.

British gilts –Sterling futures rose despite optimism among traders over the economy following an upbeat PMI services report. The June reading moved in the opposite direction to expectations indicating a marginal improvement in the services component of the economy. Implied yields eased by around three basis points while the September gilt futures contract surged by 30 ticks depressing the yield by four pips to 3.32%.

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.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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