Australian government bonds surged to 1-1/2-year highs on Wednesday, as collapsing oil prices sent a disinflationary signal across world markets while activity in currencies was muted. The Australian three-year bond contract jumped 2.5 ticks to 98.125, a level not seen since mid-2017. The 10-year contract added 3.5 ticks to 97.610. New Zealand 10-year bond prices climbed to the highest since October 2016.
The rally in bonds mirrored US Treasuries, with investors now speculating the Federal Reserve will hold off on raising rates any further after its policy meeting later in the day following an eye-popping 5 percent fall in oil on Tuesday. In currencies, the Aussie was up 0.2 percent at $0.7195, staying in sight of a recent 1-1/2-month trough of $0.7151. The New Zealand dollar gained for a third straight session to $0.6866, but was still within spitting distance of a recent three-week low of $0.6779.
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