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Asia bond prices fall after bullish ECB commentary

Wednesday 03:30 BST

Overview

The euro remained strong while Asian sovereign bonds weakened in the wake of a relatively bullish assessment of Europe’s economy from Mario Draghi.

Hot topic

Speaking in Portugal on Tuesday at the central bank’s annual conference, the ECB president said he was “confident” the bank’s policies would restore inflationary pressures in the eurozone and that the economy would recover from its recent financial crises.

The euro was the key beneficiary of Mr Draghi’s comments and gained 0.1 per cent in Asia to a 10-month high of $1.1349, consolidating Tuesday’s 1.4 per cent gain.

Fixed income

Mr Draghi’s hint that monetary policy could become less accommodative from next year pushed up yields (which move inversely to price) on German, US and UK bonds on Tuesday.

That sentiment spilled over into Asia on Wednesday, with the yield on 10-year Japanese government bonds rising 0.7 basis points to 0.054 per cent, while the yield for the Australian 10-year note gained 7bp to a five-week high of 2.43 per cent.

The yield on the benchmark 10-year US Treasury was down 0.5bp in Asia at 2.1998 per cent, conceding some of Tuesday’s 6.8bp rise after Mr Draghi spoke.

Forex

The dollar index, a measure of the US currency against a basket of global peers, was down 0.1 per cent at 96.329 and on track for its lowest close since mid-October. The rallying euro pushed the greenback 1.1 per cent lower on Tuesday, the biggest one-day drop since December.

The Japanese yen was 0.2 per cent stronger at ¥‎112.09 per dollar. The Canadian and Australian dollars, up 0.4 per cent and 0.3 per cent, respectively, benefited from a jump in commodity prices.

Commodities

Brent crude, the international benchmark, eased 0.1 per cent to $46.61 a barrel, after capping a four-day rally on Tuesday with a 1.8 per cent gain.

Iron ore futures, traded in China, were up 2.7 per cent at their highest level this month.

The price of gold was up 0.4 per cent at $1,252.43 an ounce.

Equities

Australia’s S&P/ASX 200 was up 0.2 per cent, led by commodity shares.

Other regional markets fared less well, with Japan’s Topix flat and Hong Kong’s Hang Seng down 0.8 per cent. China’s Shanghai Composite was off 0.4 per cent.

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