Aust bonds continue to slide

Australian bond future prices continued to slide on Wednesday as markets digest the Reserve Bank of Australia's (RBA) decision to hold interest rates at their current level.

The RBA surprised markets and economists following its Tuesday board meeting by opting to keep the cash rate at 4.25 per cent for February.

An AAP survey last week found 13 out of 14 economists were expecting the RBA to cut the rate to 4.0 per cent in response to concerns about the impact of Europe's debt crisis on the global economy.

The surprise decision to hold rates sparked a surge in the Australian dollar and a sell-off in bond futures on Tuesday.

JP Morgan interest rate strategist Sally Auld said bond futures traded within a narrow range on Wednesday as traders analysed the RBA's decision and reassessed their positions.

"I think what is interesting is that we've had a big sell-off and we haven't really rallied back," she said.

"What often happens is that the RBA does something that surprises people and then everyone takes a while to think about it."

Ms Auld said markets were still watching negotiations between debt-laden Greece and its creditors closely.

She said if the struggling eurozone nation was able to avoid a default on its debt, there was likely to be a boost to global sentiment, which would send bond prices sharply lower.

"If the Greek thing gets through with a minimum of fuss, watch out."

At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 95.960 (implying a yield of 4.040 per cent), down from 96.015 (3.985 per cent) on Tuesday.

The March three-year bond futures contract was at 96.480 (3.520 per cent), down from 96.530 (3.470 per cent.

• Find a personal loan
• Find a credit card
• Find a home loan
• Find a savings account