Asia-Pacific Market Recap: Aussie Bonds Rally Following Dovish RBA Statement

Market Updates | Written by CEP News | Aug 05 08 11:08 GMT |
(CEP News) - After unexpectedly dovish commentary from the Reserve Bank of Australia on Tuesday morning, Asia-Pacific fixed income markets were mixed and equities closed lower with yields on Australian 10-year bonds down 6.5 bps to 6.03% and Japanese 10-year government bonds up 3.6 bps to 1.54%.

As expected, the Reserve Bank of Australia's board decided to leave the cash rate unchanged at 7.25%, however the statement accompanying the decision was dovish, with promises of rate cuts to come.

"Given the opposing forces at work, considerable uncertainty has surrounded the outlook for demand and inflation," read the statement from the RBA. "On balance, however, it is looking more likely that demand will remain subdued, and economic growth will be fairly slow, over the period ahead."

The statement went on to read, "Nonetheless, with demand slowing, the Board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing."

The RBA last cut interest rates in December 2001, after which the Bank embarked on multiple hiking cycles in an effort to sway strong inflation pressures in the region.

Sydney's S&P ASX 200 closed down 67.30 points to 4820.4. The Japanese Nikkei closed down 18.52 points to 12914.66 and the Hang Seng closed down 565.17 points to 21949.75.

Yields on three-year Australian bonds were down 18.9 bps to 6.78 and the Australian 90-day March 09 contract was up 2.0 ticks to 93.20.

The Euroyen March 09 contract was up 0.5 ticks to 99.16.

The Australian dollar was down 1.16 cents to 0.9178 against the USD and down 0.64 cents to 0.9570 against the Canadian dollar.

Against the yen, the U.S. dollar was down 0.40 points to 107.87 and the Canadian dollar was down 1.00 point to 103.45.

The euro was down 0.80 cents to 1.5494 USD.

All data taken at 7:05 a.m. EDT.

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