Bonds Decline, Boosting Yields From 14-Month Low, as Stocks May Advance

www.bloomberg.com Thu, 30 Jan 2003, 11:31am EDT By Sineva Toevai

Sydney, Jan. 30 (Bloomberg) -- Australian bonds fell as a gain in local shares sapped demand for government debt with yields at about a 14-month low, analysts said.

The 6.5 percent bond maturing in May 2013 fell 0.606, or A$6.06 per A$1,000 amount, to 109.988 at 8:45 a.m. Sydney time. Its yield rose 7 basis points, or 0.07 percentage point, to 5.23 percent. The yield on the 7.5 percent bond maturing July 2005 rose 7 basis points to 4.57 percent.

Bonds rallied this month, pushing the yield on the 10-year bond close to the lowest level since November 2001 as concern a U.S.-led war against Iraq may curb economic growth boosted demand for securities that offer fixed payments.

Bond yields are at very low levels right now,'' said Peter Munckton, a debt market strategist at Commonwealth Bank of Australia, who expects the 10-year bond yield to rise to 6 percent in the first quarter of the year. Stocks look reasonably rich,'' he said.

The Australian SPI 200 stock futures contract due in March rose 0.6 percent, indicating stocks may rise when trading starts at 10 a.m.

The Australian dollar bought 58.93 U.S. cents compared with 59.05 U.S. cents in late Asian trading yesterday.