Australia’s dollar held earlier gains after Treasurer Joe Hockey said the nation’s budget deficit will be narrower next fiscal year than economists had forecast.
The Aussie was 1 percent stronger from Monday in New York at 79.66 U.S. cents after Hockey said the nation’s underlying cash deficit in the 12 months through June 2016 will be A$35.1 billion ($27.9 billion), A$5 billion less than estimated in a Bloomberg survey.
The amount of Australian government debt securities outstanding is projected to rise to as much as A$415.5 billion by June 30, 2016. Ten-year bond futures were little changed. The Reserve Bank of Australia reduced interest rates to a record-low 2 percent last week as the nation struggles with the end of a mining boom.
“If supply in the bond market is going up, will there be demand which we have seen in the past?” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management Australia. “That may be one reason why rates will have to adjust upwards.”
The 10-year sovereign bond yield climbed 19 basis points to 3.04 percent at the close of trading on Tuesday, the biggest one-day increase since June 2013.
The economy is on track to grow below 3 percent for six of the past seven years and the budget is being hit by a combination of a slumping terms of trade, or export prices relative to import prices, and stagnant wage growth.