Bonds

Australia's central bank tries to calm bond rout with surprise buying

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Office employees walk in front of the Reserve Bank of Australia in Sydney on September 4, 2018.
SAEED KHAN | AFP | Getty Images

Australia's central bank on Friday launched an unscheduled offer to buy three-year government bonds as a rout in global markets sent yields further above its 0.1% target.

In a surprise move the Reserve Bank of Australia (RBA) offered to buy A$3 billion ($2.35 billion) of the April 2023 to April 24 bond lines, on top of a similar amount on Thursday.

Yet the offer had scant impact in markets, where bonds were taking a hammering amid expectations of faster global growth and inflation.

Yields on cash three-year bonds were up at 0.15%, restrained in part because the RBA now owns a large part of that entire bond line. However, the implied yield on three-year bond futures, which are far more liquid, had shot to 0.35%.

Futures for 10-year bonds sank 12 ticks to 98.1550, lows last seen during the market mayhem of last March. That left them down a huge 41 ticks for the week, the steepest fall since 2001.

Yields on 10-year paper shot up to 1.847%, levels not seen since April 2019 and an increase of 45 basis points for the week so far.