Australian bonds down on firm risk sentiments

The Australian government bond yields marginally firmer Wednesday on tracking overnight rally in crude oil prices and equities market. The yield on the benchmark 10-year Treasury note which moves inversely to its price, rose 1 bps to 2.318 pct and the yield on the 2-year Treasury bond climbed 2bps to 1.617 pct by 0515 GMT.

The Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of Australia's target. The crude oil prices jumped overnight as supply outages from Canada to Nigeria helped to alleviate concerns over the global glut of crude. The International benchmark Brent futures rose to $45.33, from $43.82 in the earlier session and West Texas Intermediate (WTI) climbed to $44.49, as compared to $43.39 in the previous session.

“Rates markets traded in a very tight range overnight with little outright movement on the day, while the Australian market underperformed slightly and we expect more of the same today given the long end bond supply that's due," said ANZ economists in a research note on Wednesday.

The Australian shares rose overnight to their highest in 9-months, supported by strong gains in mining giant BHP Billiton. The benchmark Australia's S&P/ASX 200 index was up 0.6 pct, or 32.8 points, at 5,375.6 by 0410 GMT. Earlier, it reached 5,425.2, a high last seen in August.