Australian bonds continue to slump ahead of RBA policy decision

The Australian bonds continued to slump Tuesday as investors wait to watch Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled to be held today by 03:30GMT.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2-1/2 basis points to 2.86 percent, the yield on the 15-year note climbed 2 basis points to 3.16 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 1.97 percent by 01:55GMT.

With no one expecting a movement in interest rates, all interest will yet again fall on the accompanying monetary policy statement, particularly on what the board has to say in relation to Australia’s labour and housing markets, along with the broader economy.

All 23 economists polled by Bloomberg expect the cash rate will remain at 1.5% while cash rate futures put the odds of a rate movement in either direction at 0%. Any tweak to this paragraph would come as a major surprise to markets, signalling that the RBA is moving towards a change in interest rates. Given the recent data flow that change would almost certainly be higher.

Meanwhile, the S&P/ASX 200 index fell 0.63 percent to 5,694.50 by 02:05 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral  at -21.43 (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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