Strong Demand for Australian Bonds
The strongest demand at Australian bond auctions in a decade reflects yields in a sweet spot: more stable than those in the U.S. and higher than those in Europe.
Reserve Bank of Australia Governor Glenn Stevens has said he plans to keep interest rates on hold as he protects two decades of uninterrupted economic growth. In Europe, which is facing the threat of deflation, bond yields have plunged to records, curbing demand for the securities. Federal Reserve policy makers are considering raising interest rates, fueling speculation Treasury prices will fall.
“The Australian economy is not strong compared to the American economy but not weak compared to the European economy,” said Hideaki Kuriki, a bond trader in Tokyo at Sumitomo Mitsui Trust Asset Management Co. “And the yield level is high,” he said by phone yesterday.
Aussie government debt due in more than a year returned 4% to U.S. dollar-based investors in the past three months, the best performer out of 26 markets tracked by Bloomberg and the European Federation of Financial Analysts Societies.
Demand for Australian assets has pushed the local currency up 5% in 2014, the biggest gain among Group of 10 currencies against the greenback. The Aussie traded at 93.62 U.S. cents in Sydney and touched a three-week high after government data showed investment unexpectedly rose last quarter.
Source: Bloomberg
