Aust bonds firmer after RBA statement
The Australian bond market is firmer, despite the Reserve Bank of Australia (RBA) giving no hints as to when the next interest rate cut will be.
At 1630 AEST on Friday, the June 10-year bond futures contract was trading at 96.495 (implying a yield of 3.505 per cent), up from 96.480 (3.520 per cent) on Thursday.
The June three-year bond futures contract was at 97.150 (2.850 per cent), the same level as the previous session.
In its Statement on Monetary policy the RBA slashed its growth and inflation forecasts for the next 18 months but wouldn't give any clues about future interest rate cuts.
The RBA said weaker-than-expected exports and restrained wages growth caused it to revise its underlying inflation forecasts to about 2.0 per cent for the year to the end of June, 0.25 percentage points lower than it forecast three months ago.
UBS interest rate strategist Matthew Johnson said the Australian bond market range traded in a fairly tight range ahead of the release of the RBA statement.
He said bond futures prices fell a little after the statement but then rose soon after as traders tried to snap up bargains.
"The price action suggests that people were prepared to buy on dips, so it just sold a bit and there was good demand on dip," Mr Johnson said.
"I think from here we'll continue to rally.
"Reading between the lines of the RBA policy statement, I think their story is changing.
"They've been telling the story about the mining boom and low productivity problems creating inflation problems, I think that story is changing.
Mr Johnson said he is confident the rate of inflation will fall that will prompt the RBA to cut the cash rate for that reason.
All eyes will be on Friday night's release of US non-farm payrolls data for April, the American economy's key measure of employment growth.
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