Australia One-Year Yield Falls to Record After RBA Cuts Rates

  • Yield declines to 1.744%, surpassing previous low set in 2015
  • Altius's Bill Bovingdon says Reserve Bank may cut again

Australian government bonds rose, sending one-year yields to an all-time low, after the central bank cut its benchmark interest rate to a record.

Twelve-month yields declined 15 basis points to 1.747 percent as of 3:57 p.m. in Sydney, according to data compiled by Bloomberg. They fell as far as to 1.744 percent. The previous record was 1.753 percent set last year, the lowest in data going back to 1983.

The Reserve Bank of Australia reduced its benchmark by a quarter percentage point to 1.75 percent. Traders had assigned odds of about 50 percent to a move at Tuesday’s meeting, based on swaps contracts.

“We felt there would be a rate cut this year,” said Bill Bovingdon, the chief investment officer at Altius Asset Management in Sydney, who has 30 years of experience in fixed income. “We’ve been overweight the short end as a consequence. I wouldn’t be surprised to see another one.”

Ten-year bonds also gained, erasing an earlier loss. Yields declined seven basis points to 2.45 percent. The premium investors demand to hold the securities in Australia instead of the U.S. shrank to 58 basis points, the narrowest level since March 1.

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