Unexpected Slide in Australia Jobs Triggers Bonds Rally

(Bloomberg) -- Investors in Australia and New Zealand were wrong-footed for a second day as an unexpected slide in Aussie jobs triggered a rally in the nation’s bonds.

Benchmark three-year yields slid as much as eight basis points after government data showed the nation lost workers in October, defying expectations for an increase. New Zealand’s bond yields had jumped on Wednesday when the central bank left policy on hold despite the majority of economists forecasting an interest-rate cut.

The whipsawing bond markets underscore the increasing uncertainty surrounding monetary policy in the two nations. Even as economists forecast more rate cuts, signs of progress in U.S.-China trade talks may revive global growth and pull the rug out from any more monetary-easing measures.

“For both Reserve Banks, there are expectations that they will do more, but in the near term, they could be looking to pause,” said Janu Chan, senior economist at St. George Bank Ltd. in Sydney. “The trade talks have moved in a positive direction which has helped, but it’s also because there have been rate cuts already in the bag.”

Australia’s disappointing labor data boosted bets on further central bank easing. There’s a 68% chance the Reserve Bank of Australia will cut its benchmark by February, up from a 47% odds on Wednesday, according to overnight-index swaps. The pricing for a move by the end of next year climbed to 93% from 70%.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Nicholas Reynolds, Shikhar Balwani

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