Australian bond yields track slowdown in U.S. peer following ECB’s concerns over economic growth; trade war fear continues

Australian government bond yields suffered during Asian session Thursday tracking a similar slowdown in the United States counterpart following concerns over economic growth as hinted by the European Central Bank in its monetary policy statement yesterday.

Also, the trade war fear between the European Union and United States continued and trade representative of the latter, Robert Lighthizer on Monday proposed a list of EU products on which to slap tariffs as retaliation for European aircraft subsidies.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped nearly 2 basis points to 1.861 percent, the yield on the long-term 30-year bond slipped 1 basis point to 2.490 percent and the yield on short-term 2-year traded nearly flat at 1.489 percent by 03:50GMT.

Financial markets may get a short-term reprieve from the EU’s agreement to extend the Brexit deadline till October 31. Also, the ECB sounded about as dovish as one can get while keeping its policy settings static, signalling that it will not hike rates at least through the end of 2019, and in any case for as long as necessary, and intends to continue reinvesting in full maturing securities, as well as stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards its inflation aim in a sustained manner, OCBC Treasury Research reported.

Further, the FOMC minutes reflected that “participants generally agreed” on a “patient approach” with a majority of participants favouring “leaving the target range unchanged for the remainder of the year” amid a data-dependent approach (“ongoing assessments of the economic outlook, as informed by a wide range of data, as well as on how the risks to the outlook evolved”), the report added.

Meanwhile, the S&P/ASX 200 index traded nearly flat at 6,188.50 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 71.14 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex