3y bonds closed at 1.78%, up 5bps over the month but not far from the month low of 1.73% and well off the high of 2.00%. The trading range of 10y bonds was not quite as wide with rates ranging between 2.61% and 2.91%, closing the month at 2.64%, down 6bps for the month. Like the 3y bonds, the 10y bonds closed close to the low for the month. The new and long-awaited 20yr bond futures contract began trading in September closed the month at 3.17%.
The RBA kept cash rates unchanged but September was dominated by the US Fed and speculation as to the whether it would lift interest rates for the first time in a decade. The much anticipated two day FOMC meeting (18 and 19 September) saw rates rise in advance although the US market was only pricing in a rate rise as a 30% chance. The Fed kept rates steady as they worried about volatile markets and fragile global growth. UK and US CPI figures were released showing inflation at or near zero and it seemed the Fed took note of this. Earlier in the month data showed lower global growth with a slowing China and falling commodity prices. Australian GDP came in at 0.2%, half the rate expected and with nominal growth at 1961/62 levels.
Markets seemed somehow disappointed in the Fed inaction with much commentary about the Fed ‘missing its chance’ to move away from zero rates.
AUSTRALIAN GOVT BONDS
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