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Australian 10-year bond yield falls to 2-week low as trade concerns curb risk appetite

Australian government bonds gained on last trading day of the week Friday after the Federal Reserve hints at faster rate hikes, while concerns about a US-China trade war also hurt sentiment.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 2 basis points to 2.699 percent (2-week low), the yield on the long-term 30-year Note dipped 4 basis points to 3.199 percent and the yield on short-term 2-year down 1 basis point to 2.024 percent by 03:20 GMT.

In the United States, Treasuries held tighter ranges on Thursday as markets continued to absorb the June FOMC statement, alongside developments out of the ECB towards unwinding its QE program (though softened by an apparent commitment to keeping rates unchanged until at least through summer 2019).

All of this fits into the Fed's broader narrative of increased consumption, amidst a further tightening labor market and further upward pressure on inflation. Although none of this should be seen as particularly shocking, it does serve to drive home the Fed's message that further rate hikes are on the way (though should not be seen as coming at a more aggressive pace).

Markets now look ahead to a lighter flow of data to finish off the week on Friday, highlighted by Empire manufacturing, industrial production/capacity utilization and University of Michigan consumer sentiment releases.

Figures from the Australian Bureau of Statistics (ABS) released on Thursday showed Australian employment rose by lower-than-expected in May with gains led wholly by part-time work while the jobless rate ticked down to its lowest since November, a mixed outcome that points to tepid wages growth. The unemployment rate eased to 5.4 percent from 5.6 percent in April. It has remained between 5.4 percent and 5.6 percent for almost a year now.

Meanwhile, the S&P/ASX 200 index traded 0.65 percent higher at 6,098.5 by 03:50 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -26.51 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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