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Aussie Yields Post Biggest Gain in 2 Weeks on China GDP

Australia’s bonds fell, pushing the benchmark 10-year yield up by the most in two weeks, after data showed economic growth in China exceeded economist estimates, supporting export prospects.

The rate on the three-year note also posted its biggest one-day advance in two weeks amid gains in Chinese industrial production and retail sales, boosting bets the Reserve Bank of Australia will keep borrowing costs unchanged when officials meet next month. New Zealand’s currency, known as the kiwi, weakened following a report that showed an unexpected drop in the nation’s consumer prices.

“All signs point to a modest pickup in Chinese growth towards the end of the year,” said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “It probably suggests the RBA will be comfortably on hold to February, if not March, which should keep the upward bias to yields in the near-term.”

Australia’s 10-year yield rose 12 basis points, or 0.12 percentage point, to 3.41 percent at 5:01 p.m. in Sydney, the biggest advance since Jan. 2. The rate on three-year securities climbed 10 basis points to 2.81 percent, also the largest increase since Jan. 2.

The Australian dollar fell 0.2 percent to $1.0522 and was little changed at 94.76 yen. Its New Zealand counterpart dropped 0.1 percent to 83.57 U.S. cents and rose 0.1 percent to 75.26 yen.

Chinese Growth

Gross domestic product in China, Australia’s biggest trading partner and New Zealand’s second-largest export destination, rose 7.9 percent in the fourth quarter from a year earlier, according to a report today by the National Bureau of Statistics. That compared with the 7.8 percent median estimate in a Bloomberg News survey and a 7.4 percent gain in the previous period.

Industrial output in December rose a more-than-expected 10.3 percent from the prior year, while retail sales climbed 15.2 percent.

Interest-rate swaps data compiled by Bloomberg show traders see a 55 percent chance RBA Governor Glenn Stevens will keep borrowing costs unchanged at 3 percent by the bank’s Feb. 5 rate decision. That’s up from 43 percent odds a month ago. There’s an 86 percent probability the cash rate will fall to a record 2.75 percent or lower by the July 2 meeting, according to the figures.

Bear Fodder

“The probability for a rate cut in February has been reduced, but markets are still comfortably priced for more than one easing in the coming months,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “There is still plenty of fodder for the Aussie dollar bears to focus on.”

Australia’s statistics bureau will probably say on Jan. 23 that consumer prices in the South Pacific nation rose 0.4 percent in the three months through December, according to the median forecast of economists surveyed by Bloomberg. That would be the slowest pace since the first quarter of 2012 and compares with a 1.4 percent advance in the previous period.

The so-called Aussie slid versus most of its 16 major counterparts today and is headed for a 0.1 percent weekly decline against its U.S. peer. New Zealand’s currency has lost 0.1 percent versus the greenback since Jan. 11.

Statistics New Zealand said today consumer prices declined 0.2 percent in the three months through December after rising 0.3 percent in the previous quarter. The central bank expected a 0.1 percent advance, as did economists according to a Bloomberg survey.

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