The Australian government bonds traded nearly flat on Wednesday as investors awaited the Fed policy decision.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price remained unchanged at 2.073 percent and the yield on short-term 2-year bond stood flat at 1.631 percent by 04:45 GMT.
In the global debt market, the benchmark 10-year US Treasury note yield hit fresh 4-month low as 'Brexit' vote looms. The benchmark German 10-year bund yields fell below zero for the first time on Tuesday to -0.03 percent.
The JGBs hit new record low yields, following global debt prices as investors remain uncertain about the global economic outlook and the near-term path of BoJ and US interest rates. Also, investors shifted to safe-haven instruments after recent four polls suggested Britain is on course to leave the European Union. Meanwhile, 20-year JGB yield fell to a record low of 0.145%, 30-year yield to 0.215% and benchmark 10-year yield to record low of -0.185%. The UK 10-year gilt yield hits new low of 1.14 pct, likely to test 1.10 pct mark soon.
In addition, the FOMC monetary policy statement will be published Wednesday, 15 June at 18:00 GMT, accompanied by updated economic projections and followed by Fed Chair Yellen’s post-statement press conference. On balance, markets look to see how the FOMC is interpreting recent data weakness (particularly employment) and how it may alter intentions to raise rates further in 2016.
In many respects, the December move to raise rate was viewed simply as the Fed looking to get the show on the road, allowing them to possibly maintain a shallow rate trajectory as they move towards more normal policy. Hence, clear focus will on Federal Reserve Chair Janet Yellen's speech in an attempt to estimate the Fed's likely next step to raise interest rate.
The Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of Australia's target. Today, crude oil tumbled more than 1 percent after data showed a surprise build in U.S. crude inventories last week, adding to the market's nervousness around Britain's vote next week on whether to leave the European Union. The American Petroleum Institute (API) showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, against market consensus for a decrease of 2.3 million barrels. The International benchmark Brent futures fell 1.40 pct to $49.13 and West Texas Intermediate (WTI) dipped 1.42 pct to $47.80 by 04:45 GMT.
Markets will remain keen to focus on unemployment rate on Friday at 01:30 GMT. Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading down 0.13 percent, or 6.5 points, at 5,129.5 by 04:45 GMT.
