Australian 10-year bond yields hit 1-week high tracking strong rebound in Q4 GDP

The Australian 10-year government bond yields hit 1-week high Wednesday, after reading strong Q4 gross domestic product (GDP) of the country, widely beating what markets had initially anticipated.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 7 basis points to 2.81 percent, the yield on 15-year note also surged nearly 7 basis points to 3.24 percent and the yield on short-term 2-year rose 3-1/2 basis points to 1.86 percent by 03:50 GMT.

Australian GDP bounced by a strong 1.1 percent q/q in Q4 to bring annual growth up to 2.4 percent from an upwardly revised 1.9 percent in Q3 (previously 1.8 percent). This was stronger than market forecasts and stronger than the RBA’s forecasts of around 0.8 percent q/q.

While growth was stronger across the board, the inflation indicators in today’s report were particularly weak. The household consumption deflator rose just 0.3 percent and is up only 0.9 percent over the past year. More importantly, the GDP measure of wages fell 1.0 percent q/q and is 0.1 percent lower than a year ago.

Further, the bank forecasts growth to pick up to around 3 percent on an annual basis later in 2017, and to remain above estimates of potential growth over the rest of the forecast period. Further, the central bank predicts that rising resource exports in a more positive global environment will spur growth in Australia as the drag from falling mining investment wanes.

Meanwhile, the ASX 200 index traded 0.23 percent down at 5,670.50 at 04:20GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 29.54 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex