Australia: Shares fall, bond yield soars on rate hike fears

[BENGALURU] Australian shares fell on Thursday (Oct 28), dragged down by mining and energy stocks on weak commodity prices, while the central bank's decision to skip buying a government bond prompted investors to begin pricing in a rate hike.

The S&P/ASX 200 index closed 0.3 per cent lower at 7,430.4 with most sectors trading in the red. The benchmark ended flat on Tuesday.

The Reserve Bank of Australia (RBA) in an unexpected move did not offer to buy the April 2024 bond, sending the yield soaring above its target and stoking market wagers that rates would be raised 2 years earlier than current forecast of 2024.

"The RBA's decision is disturbing as the yield on the 2-year bonds doubled from 25 basis points to 50 basis points in a matter of minutes. They have certainly lost the yield curve," said Brad Smoling of Smoling Stockbroking.

Markets were expecting the RBA to buy the April 2024 bond in order to contain the recent blow out in yields, he added.

Miners were down 1.4 per cent, extending losses to a second straight session, on weaker iron ore prices.

Two of the 3 mining giants - Rio Tinto and BHP Group - were down 1.5 per cent and 1.7 per cent, respectively.

Fortescue Metals Group was flat after the world's No 4 iron ore miner reported record quarterly shipments but received less price per tonne due to a major drop in commodity prices.

Energy shares fell 2 per cent following a slump in oil prices, while China's decision to monitor surging coal prices dragged stocks on the subindex further.

Whitehaven Coal fell 5 per cent to lead losses on the sub-index, while Woodside Petroleum lost 2.5 per cent.

Bucking the trend, No 2 electronics retailer JB Hi-Fi jumped 3.2 per cent on seeing a rebound in sales as Australia gradually loosens Covid-19 restrictions.

In New Zealand, the benchmark S&P/NZX 50 index closed 0.4 per cent lower at 12,970.99.

REUTERS