Australian bonds fall amid muted trading session ahead of U.S.-China trade talks

Australian government bonds fell during Asian trading session Wednesday amid a muted day that witnessed data of little economic significance as investors await a trade talk meeting between President Donald Trump and Chinese leader Xi Jinping at the G-20 meeting in Osaka, Japan on June 28-29.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, surged nearly 2 basis points to 1.293 percent, the yield on the long-term 30-year bond also jumped nearly 2 basis points to 1.905 percent and the yield on short-term 2-year gained nearly 3-1/2 basis points to 0.938 percent by 04:35GMT.

Another soft session overnight for Wall Street as Fed chair Powell warned of downside risks to the US economy but stopped short of hinting of imminent rate cuts and the White House administration downplayed hopes of a trade deal with China ahead of the highly anticipated Trump-Xi meeting this weekend, OCBC Treasury Research reported.

The US supposedly will not accept any further conditions on tariffs as part of re-opening negotiations, but is said to be prepared to delay fresh tariffs for now. In addition, US president Trump threatened that “any attack by Iran on anything American will be met with great and overwhelming force”, after Iranian President Rouhani accused the Trump administration of “mental retardation”.

UST bonds rallied with the 10-year yield back below 2 percent to 1.994 percent (lowest since November 2016), the report added.

Meanwhile, the S&P/ASX 200 index remained flat at 6,579.50 by 04:40GMT, while at 040:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 64.47 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex