Australian Bonds Rise as Growth Concern Boosts RBA Easing Bets

Australia’s government bonds rose, sending the 10-year yield to the lowest in more than four months, as investors added to bets the central bank will cut borrowing costs.

Interest-rate swaps data compiled by Bloomberg show traders see a 40 percent chance the Reserve Bank of Australia will lower its benchmark to record 2.75 percent at the next meeting on May 7, compared with 22 percent probability indicated a week ago. Australia’s dollar reached a one-month low as stocks and commodity prices retreated. The International Monetary Fund cut its global growth forecast this week, citing a lagging recovery in Europe.

“A big drop in consumer prices or lackluster global growth could boost easing expectations,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd., a unit of Japan’s largest currency margin company. “The Aussie and kiwi are hit as stocks and commodity prices declined.”

Three-year yields in Australia touched 2.68 percent, the lowest since Jan. 24. Ten-year yields fell as much as nine basis points, or 0.09 percentage point, to 3.17 percent, a four-month low.

Australia’s dollar fetched $1.0318 as of 4:39 p.m. in Sydney from $1.0297 yesterday, after earlier touching $1.0269, the lowest since March 12. The so-called Aussie was little changed at 101.07 yen.

The New Zealand dollar rose 0.3 percent to 84.68 U.S. cents from yesterday, when it declined 0.6 percent. The currency bought 82.95 yen from 82.82.

The MSCI Asia Pacific Index (MXAP) dropped 1.1 percent. Thomson Reuters/Jefferies CRB index of raw materials lost 0.8 percent yesterday.

RBA Policy

In March, the RBA sold A$71 million ($73 million) more in local currency than it bought through the so-called other outright transaction category and sold a net A$577 million in the spot market.

The central bank reiterated in the minutes released this week of its April 2 meeting that the Australian dollar “remained high” and the inflation outlook gives it room to cut borrowing costs.

Australia’s consumer prices probably rose 2.8 percent in the first quarter from a year earlier, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Statistics releases the data on April 24.

Global Growth

The Washington-based IMF trimmed its global growth forecast this week to 3.3 percent for 2013 from the January estimate of 3.5 percent.

The Shanghai Composite Index (SHCOMP) erased earlier losses after China’s new home prices rose. The gauge gained 0.2 percent, after falling as much as much as 0.8 percent. Property prices increased in all but two cities, the National Bureau of Statistics said in a statement today. China is the biggest trading partner for both Australia and New Zealand.

“Chinese home sales in March were quite good,” said Bill Diviney, a Tokyo-based currency strategist at Barclays Plc. “This seems to be what’s driven Shanghai stocks to recover a bit. I don’t think it’s a huge positive for the Aussie, but you could say it’s a factor that’s supporting it.”

In New Zealand, job advertisements rose for a second month in March. The number of postings in newspapers and the Internet increased 0.7 percent last month from a revised 1.8 percent in February, ANZ Bank New Zealand Ltd. said in Wellington today.

New Zealand’s two-year swap rate, a fixed payment made to receive a floating rate, fell two basis points to 2.85 percent. The Reserve Bank of New Zealand will meet on April 24.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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