SYDNEY: Australian three-year bond futures dipped to a one-week low on Monday, implying yields of nearly 0.3%, as investors feared a stellar economic recovery would rekindle inflation and spur interest rate hikes. A global bonds sell-off gathered momentum last month on worries massive US fiscal stimulus and pent-up consumer demand would flare inflation with expanding vaccination campaigns expected to bring an end to lockdowns.
In Australia, the country’s central bank responded last week by doubling the fee it charges for lending out April 2023 and April 2024 government bonds. Moreover, Reserve Bank of Australia (RBA) Governor Philip Lowe also forcefully pushed back on market pricing for rate hikes.
The spike in bond yields did little to push the Australian dollar higher which was down for a second straight session at $0.7747, drifting away from a three-high high atop 80 US cents touched late last month.
The New Zealand dollar was up 0.3% at $0.7196, still far away from a 3-1/2-year high of $0.7463 seen last month. The kiwi has drifted away from a recent trough at $0.7100, which now marks strong support.
New Zealand government bonds fell with yields 11-12 basis points higher at the long end of the curve.
In Australia, the three-year government bond futures contract fell sharply to 99.706 from Friday’s close of 99.764 while the 10-year contract fell 8 ticks to 98.177.