Australian bonds are rallying sharply with the increasing likelihood of Republican Donald Trump winning the US presidential election and an accompanying flight to safe haven investments.
Commonwealth Bank head of debt research Adam Donaldson said between noon and 1500 AEST on Wednesday local 10-year bond futures contracts had leapt more than 17 basis points - the biggest rally since the Brexit vote in June.
"That clearly reflects a very broad risk-off tone that we're seeing across markets, so equities down and the Australian dollar down, the US dollar down and so on," Mr Donaldson told AAP.
"That reflects that there is now a significant amount of uncertainty about what the outlook for US policy and the US economy is, and concern there will be ongoing adverse reaction from markets."
At 1500 AEST on Wednesday, the December 2016 10-year bond futures contract was trading at 97.790 (implying a yield of 2.210 per cent), up sharply from 97.620 (2.380pct) on Tuesday.
The December 2016 three-year bond futures contract was at 98.410 (1.590 per cent), up sharply from 98.260 (1.740pct).
KEY MOVEMENTS:
Government bond yields:
* CGS 5.25pct March 2019, 1.586pct, from 1.723pct on Tuesday.
* CGS 4.25pct April 2026, 2.138pct, from 2.353pct
Sydney Futures Exchange prices:
* December 2016 bank bill futures, 98.250, from 98.220 on Tuesday
* March 2017 bank bill futures, 98.300, from 98.250.
(*Closes taken at 1630 AEST previous local session)
Source: IRESS
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