The strangest thing about the price action on Friday night was how aggressively interest rate traders had sold bonds. US 10 Year Bonds were up 6 points to 2.47%, German 10’s came under heavy selling, rising 6 points to 0.93%, while Australian 10 year bonds went along for the ride, up 8 points to 3.16%.
It was a weird move given the cautious trade in stocks and forex markets.
With the ASX down almost to 2% in the first 15 minutes of trade it’s also a move that has been completely reversed this morning as interest rate traders are back buying bonds with gusto.
That’s seen futures bid all around the world and Australia’s 10 year bond rallying 24 points to sit a 2.92% this morning.
But it’s not just long bonds that are moving. The entire curve in Australia has rallied with three year bonds down 2.01% — 12 basis points from Friday’s highs.
It’s also impacting on futures trader’s expectations of another RBA rate cut and a push back in Fed tightening expectations as Sean Callow tweeted earlier this morning.
Pricing for RBA rate cut by Dec 2015 rises from 50% to 74% after weekend Greece news. Fed hike probabilities also trimmed
— Sean Callow (@seandcallow) June 28, 2015
Bonds, Cash and the Yen — the natural beneficiaries of an increase in uncertainty and trader fear.