Australian bonds flat in thin trade

The Australian bonds traded nearly flat on Monday, succumbing to thin trading activity as market receives no more important data or events on the first day. The yield on the benchmark 10-year Treasury note which moves inversely to its price remained unchanged at 2.308 pct by 0500 GMT.

Report from the Australian Bureau of Statistics on last Thursday showed Australia's jobless rate came in unchanged at 5.7 pct in April, compared to median forecast for a rise to 5.8 pct. The bureau said its seasonally adjusted workforce participation rate fell to 64.8 pct in April from 64.9 pct in March, below consensus expectation of 64.9 pct. 10,800 jobs were added in the month versus expectations of 12,000. The reading for March was also revised down, from 26,100 to 25,700. Full time employment fell 9,300, while part-time jobs rose 20,200. Despite some slowdown in momentum in jobs growth, the stability in the unemployment rate at 5.7% suggests that the labour market remains in good shape. The lack of wage pressure has helped provide an underpinning to a surprisingly resilient labour market. Data earlier this week showed that Australian wages grew at a mere 0.4 percent in Q1, their slowest pace on record last quarter. Deceleration in wages growth leads to reduced cost pressures for businesses and hence ongoing downwards pressure on inflation.

The Reserve Bank of Australia is likely to look through a resilient labour market report which will probably see no significant monetary policy implications. Speculation is high that the RBA will cut interest rates further in coming months. Cash rate futures currently put the odds of a further 0.25% rate cut from the RBA in August at 73%, unchanged from earlier in the session.

“Financial markets stabilised during the Friday session, with US Treasuries little changed and markets took somewhat of a breather following the reprising of Fed rate hike expectations during the week," the ANZ economists said in a note.

Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market. The International benchmark Brent futures fell 0.43 pct to $48.51 and West Texas Intermediate (WTI) dipped 0.58 pct to $48.13 by 0500 GMT.

The markets will now focus on the RBA Governor Stevens Speaks on Tuesday (0305 GMT) in an attempt to estimate the RBA's likely next step to lower interest rate. The benchmark Australia's S&P/ASX 200 index was trading down 0.29 pct, or 15.5 points, at 5,342.5 by 0500 GMT.