Australian bonds gain after concerns over North Korea, geopolitical tensions stoke safe-haven demand

The Australian bonds rallied Tuesday after U.S. Treasury yields fell on Monday as concerns about tensions between North Korea and the United States and a surge in support for the far right in Sunday's German election stoked safe-haven demand for U.S. government bonds.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1-1/2 basis points to 2.78 percent, the yield on 15-year note slumped 2-1/2 basis points to 3.06 percent and the yield on short-term 2-year also traded 1 basis point lower at 1.96 percent by 02:00GMT.

On Monday, North Korean foreign minister Ri Yong Ho said U.S. President Donald Trump declared war on North Korea and that Pyongyang reserves the right to take countermeasures amid heated rhetoric between Trump and North Korean leader Kim Jong Un over the latter's nuclear weapons program.

U.S. bond yields initially fell in step with their German counterparts following a surprisingly weak election result for Germany's Angela Merkel. A surge in support for the far right stoked concerns about a more hardline stance towards the euro zone.

Lastly, earlier on Monday, New York Fed President William Dudley said the U.S. central bank is on track to gradually raise rates given factors depressing inflation are "fading" and the U.S. economy's fundamentals are sound.

Meanwhile, the S&P/ASX 200 index traded 0.19 percent lower at 5,676.50 by 02:30 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 47.37 (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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