Australian bond traders have reacted cautiously to media reports that France and Germany have agreed to boost Europe’s rescue fund.
Global stocks and currency markets rallied early on Monday morning, after the Guardian newspaper said Germany and France had reached an agreement to increase the European rescue fund to two trillion euros ($A2.72 trillion) as part of a “comprehensive plan” to resolve the sovereign debt crisis.
ICAP senior economist Adam Carr said the news caused Australian bond futures to sell-off, in a sign that risk-sentiment was improving.
Those gains were lost by the time the local market opened, after European Union officials denied the reports.
At 0830 AEDT on Wednesday, the December 10-year bond futures contract was trading at 95.530 (implying a yield of 4.470 per cent), up from 95.500 (4.500 per cent) on Tuesday.
The December three-year bond futures contract was at 96.170 (3.830 per cent), unchanged from where it closed on Tuesday.
Bt 0913 AEDT, the three-year contract had settled at 95.505 (4.495 per cent).
Meanwhile, official data overnight showed British annual inflation had risen to a three-year peak in September and US wholesale prices climbed 0.8 per cent in September.
Mr Carr said the data added to ongoing concerns that global inflation was gradually increasing.
“This isn’t front and centre, but it’s on people’s minds more broadly, as a problem,” he said.
“Once we see a resolution of European concerns, this is something that could catch on quite quickly.”
At 0925 AEDT, Reserve Bank of Australia assistant governor Guy Debelle is due to address the Annual Finance and Treasury Association Congress in Sydney.
Westpac and the Melbourne Institute are due to release their Leading Indexes of Economic Activity for October, later in the morning.