Australian bonds trade mixed after dovish FOMC minutes, firm equities

The Australian long-term bonds traded mixed on Thursday after dovish FOMC meeting minutes and improved risk appetite in equity markets. The benchmark 10-year bonds yield, which is inversely proportional to bond price rose 0.20 pct to 2.458 pct and 3-year bonds yield climbed 0.11 pct to 1.868 pct by 6:00 GMT.

The Fed in its March FOMC meeting minutes indicated that participants agreed that their ongoing assessments of the data and the implications for the outlook, rather than calendar dates, would determine the timing and pace of future adjustments to the stance of monetary policy. Although a range of views were expressed about the incoming information would be sufficient to make an adjustment in April, a number of participants judged that headwinds restraining growth (an holding down the neutral rate of interest) were likely to only subside slowly. 

Accordingly, factoring risks to the economic outlook, several participants expressed the view that raising the target range for Fed Funds as soon as April would signal a sense of urgency that they did not think was appropriate. This very much supports the view that rates are likely to move higher over the course of 2016 (most likely beginning in June), though appears to increase the likelihood that the April meeting would see the current “wait and see” approach to monetary policy continue.

Australia March construction industry PMI fell a 13-month low to 45.2 from 46.1 in February on continuation of soft overall demand conditions.

Meanwhile, the S&P/ASX 200 index rose 0.3 pct or 11.788 points to 4,957.7 by 03:33 GMT, having bounced off a 1-month low on Thursday.