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Australian bond yields plunge tracking U.S. 10-year peer as investors fret over long trade skirmish

Australian government bond yields plunged during Asian session of the last trading day of the week Friday tracking the United States 10-year counterpart which fell to its lowest since 2017, following deepening angst among the investors over a longer period of trade battle with China.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 5 basis points to 1.535 percent, the yield on the long-term 30-year bond slumped 4 basis points to 2.194 percent and the yield on short-term 2-year plummeted 5-1/2 basis points to 1.108 percent by 02:45GMT.

Risk-off sentiments are likely to dominate today amid the pessimism surrounding the trade tensions and widespread manufacturing weakness. The US’ manufacturing PMI unexpectedly declined to its lowest on record for the past three years, hence joining its German PMI counterpart which came in weaker than expected, OCBC Treasury Research reported.

Overnight, the Dow dumped 286 points (defying Trump’s “glitch” prediction) and the 10-year UST bond yield tested 2.32 percent (lowest since October 2017) and inverting the 3-month to 10-year yield curve again for the first time again since May 15, the report added.

"China is prepared to hunker down and support its private enterprises rather than yield to the financial pressures being applied by the US. As both sides will only negotiate on their own terms, it could be years before the two powers can find sufficient common ground. Nomura is pricing in a 65 percent probability of the US imposing tariffs on all Chinese goods before year end," ANZ Research commented in its latest Australian Morning Focus.

Meanwhile, the S&P/ASX 200 index slipped 0.18 percent at 6,452.5 by 02:50GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 104.38 (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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July 2 15:00 UTC Released

DKCurrency Reserves

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449.6 Stale

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451.7 Stale

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50 %

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48.6 %

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-1541 %

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-1541 %

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