Bloomberg News

Australian Bond Yields at 5-Month Low on Global Slowdown Signs

May 01, 2013

Australia’s government bonds rose, sending 10-year yields to the lowest in more than five months as stocks declined on concern the global economy is slowing.

The so-called Aussie remained lower before data forecast to show manufacturing contracted in Germany and expanded at a weaker pace in China. New Zealand’s dollar declined for a third day against the yen after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy producer, said whole milk powder prices fell for the first time this year.

The bond market is “reacting to the weak headline global growth numbers and the outlook for RBA policy in the near term,” said Andrew Salter, a Sydney-based foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. “Germany has weakened more than most in the market anticipated. To the extent that we do get a confirmation of that weakness, I think we should see risk taken off the table.”

The yield on Australia’s 10-year bonds fell eight basis points, or 0.08 percentage point, to 3.02 percent, a level unseen since Nov. 16. The three-year rate touched 2.53 percent, the lowest since Nov. 19.

The Australian dollar touched $1.0250 and declined 0.2 percent to $1.0256 as of 11:16 a.m. in Sydney from yesterday, when it dropped 0.9 percent. It lost 0.2 percent to 99.86 yen.

New Zealand’s dollar, nicknamed the kiwi, traded at 84.91 U.S. cents from 84.99 yesterday, when it weakened 0.8 percent. The currency slid 0.1 percent to 82.69 yen, having fallen 1.2 percent in the previous two sessions.

The MSCI World Index of stocks declined 0.7 percent yesterday, while the Thomson Reuters/Jefferies CRB index of raw materials dropped 1.7 percent.

Global Growth

The Purchasing Managers’ Index (EC11CHPM) of Chinese manufacturing probably fell to 50.5 in April from 51.6 the previous month, according to the median estimate of economists surveyed by Bloomberg News before HSBC Holdings Plc and Markit Economics release the data today.

A government report yesterday showed Chinese manufacturing expanding at a slower pace last month. China is the biggest trading partner for both Australia and New Zealand.

Economists in a separate Bloomberg poll estimate the final reading of a factory index in Germany remained at 47.9 in April, below the 50 level and indicating contraction. Markit Economics will release its figures today.

Milk powder for July delivery declined 4.8 percent, according to a trade-weighted index on Fonterra’s GlobalDairyTrade website. It was the first fall since Dec. 18. The near-term contract for New Zealand product fell to $6,001 a metric ton from a record $6,283 on April 16.

Australia’s Bureau of Statistics will report on the number of building approvals in March today.

Interest-rate swaps data compiled by Bloomberg show traders see a 43 percent chance the Reserve Bank of Australia will lower its benchmark to 2.75 percent at the next meeting on May 7.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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