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HomeNewsAustralian Bonds Fall Ahead of US Inflation Data: Markets Wrap

Australian Bonds Fall Ahead of US Inflation Data: Markets Wrap

Feb 12, 2024 07:01 AM IST

Australian and New Zealand bonds fell, echoing selling in Treasuries on Friday, ahead of US inflation data this week that will help identify the path ahead for the Federal Reserve.

(Bloomberg) — Australian and New Zealand bonds fell, echoing selling in Treasuries on Friday, ahead of US inflation data this week that will help identify the path ahead for the Federal Reserve.

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The two nations’ 10-year yields climbed three basis points in early trading Monday after their US equivalent edged higher Friday. Australian stocks fell, while major currencies were broadly stable after an index of the dollar extended losses from Friday. 

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Monday is marked by broad closures across Asia, with markets closed in China, Hong Kong, Singapore, Taiwan, South Korea, Malaysia and Vietnam for Lunar New Year holidays. A holiday in Japan means cash trading in Treasuries will be closed in Asia Monday.

US equity futures were little changed after shares ended Friday with a rally that pushed the S&P 500 to close above 5,000 index points for the first time. 

The yen was slightly stronger Monday at above 149 per dollar after touching a two-month low on Friday. The weakness followed comments from central bankers that the Bank of Japan would take its time raising interest rates. The yen is the worst performer among Group-of-10 currencies this year.

US inflation data due Tuesday will be crucial for the Fed. Headline year-over-year inflation is expected to come in at 2.9%, according to consensus estimates — that would be the first reading below 3% since March 2021. Core inflation is set to ease fractionally lower to 3.7% on an annual basis, according to average forecasts from economists polled by Bloomberg.

“High inflation rarely has been tamed without precipitating a recession,” Ed Yardeni, president of Yardeni Research Inc., said in a Monday note. “The Fed has steered inflation down toward its 2% target while allowing the US economy to fly, avoiding a hard landing.”

The S&P 500 rose 0.6% on Friday to cap a fresh record, while the Nasdaq 100 rose 1%. The gains were helped along by technology stocks and positive signals from fourth-quarter earnings reports. Four in five of the companies that have reported in earnings season so far have exceeded expectations, brightening the outlook for corporate profits among analysts.

The advance for US stocks came even as traders push out expectations for Federal Reserve policy easing after commentary from central bankers that has skewed hawkish, and economic data showing no immediate need to trim interest rates.

Swaps market pricing shows investors anticipate the chance of a Fed cut in March at 15%, down from 65% a month ago. Traders also foresee four 25 basis-point rate cuts in 2024, down from seven forecast at the end of last year.

In commodities, oil prices fell after comments from Iran’s foreign minister over the weekend who said the war in Gaza could be nearer to a “diplomatic solution”. The drop for oil followed five consecutive days of gains.

In Asia, data set for release includes inflation and industrial output reports for India. 

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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