Australian 10-year bond yields hit highest in 6 months on Trump’s inflation specter

The Australian government bonds slumped Friday on expectations that U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

Also, a higher implied probability of the United States Federal Reserve December interest rate hike drove out investors from safe-haven buying.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose nearly 9 basis points to 2.583 percent (highest in 6 months), the yield on 15-year note jumped 8 basis points to 3.012 percent and the yield on short-term 2-year climbed 4 basis points to 1.723 percent by 05:00 GMT.

On Wednesday, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Investors again revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 80 percent.

The rout in bonds came as the Republican nominee’s seizure of the White House stoked investor expectations that inflation will accelerate and traders pared their bets on further monetary easing by central banks in Australia and New Zealand. U.S. bonds declined on Wednesday as a $23 billion Treasury auction of 10-year notes saw the lowest demand since the financial crisis, with interest from foreign buyers particularly weak. Yields on 30-year American notes increased the most in more than five years, Bloomberg reported.

Moreover, initial jobless claims in the United States fell during the week ended Nov 5, from almost a three-month high in the run-up to the country’s most impactful Presidential election concluded Nov 8, with the results being declared on the following day. Also, the fall in the number of people opting for unemployment benefits has strengthened the probability of a December interest rate hike by the Federal Reserve.

U.S.’s jobless claims fell by 11,000 to 254,000 in the week ended November 5, data released by the Labor Department report showed Thursday in Washington. The median forecast in a Bloomberg survey called for 260,000. Continuing claims rose, though the four-week average dropped to the lowest since 2000.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.39 percent higher to 5,358.5 by 05:00 GMT. While at 05:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at 13.73 (lower than the range of 75-100 for bullish trend).