A$ steadies as local bond sale draws big bids

Sydney

THE Australian dollar steadied on Tuesday as strong demand for a local bond issue and upbeat trade data from China helped offset caution over the spread of coronavirus.

The Australian government sold A$17 billion (S$16.4 billion) of a new 2025 bond line, the second largest sale on record, while drawing bids worth a huge A$50.6 billion.

The offer priced at a little above fair value in an effort to sell as much as possible ahead of the government's budget update due next week, when analysts suspect it will forecast wider deficits and increased stimulus spending.

Three-year bond futures were all but steady at 99.690, implying a yield of 31 basis points.

The Aussie dollar was also little moved at US$0.6940, having failed to clear resistance around US$0.7000 in recent days.

The New Zealand dollar was a fraction softer at US$0.6532, after also stalling in the face of resistance at US$0.6593 as coronavirus concerns globally tempered risk appetite.

Sentiment was underpinned by figures showing both Chinese exports and imports topped forecasts in June, while the Asian giant continued to buy significant amounts of commodities including iron ore.

Domestic data was promising with a survey of Australian business showing a marked pick up in both activity and sentiment in June, though the result pre-dated a fresh outbreak of coronavirus that shut down Melbourne.

Figures from New Zealand have also shown a rapid recovery in the housing market with home sales almost back to where they were in March before a nationwide lockdown and prices bouncing 0.9 per cent in June.

"Large swathes of the economy have resumed business as usual, which seems to have been mirrored by the housing market," said Jeremy Couchman, a senior economist at Kiwibank.

"We're not yet convinced the jump in activity will be sustained," he cautioned.

"The labour market continues to deteriorate, and the end of temporary wage subsidy from next month is likely to expose some wounds." REUTERS