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Australian bonds gain amid concerns over slowing global growth; December RBA meeting minutes in focus

Australian government bonds gained across the curve during Asian session Monday as investors remain cautious amid slowing global economic growth.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 2 basis points to 2.448 percent, the yield on the long-term 30-year bond also dipped 2-1/2 basis points to 2.960 percent and the yield on short-term 2-year down 1 basis point to 1.986 percent by 03:00GMT.

“The U.S. Treasuries richened across the curve following soft data from China and Europe. Tonight’s mid-year budget update from the federal government is likely to show an improved fiscal situation, and on Tuesday the AOFM will publish its revised borrowing program for 2018-19. Domestic funding pressures showed signs of easing on Friday, whether this continues today will be a focus,” noted economists at ANZ Bank.

In addition, Scotiabank said the market has been increasingly concerned about escalating risks of a synchronized global slowdown. The U.S. stock selloffs have dented risk sentiment and raised odds of the Fed easing rate hikes in 2019. Fed Funds Futures, OIS, Eurodollar Futures and UST 5Y5Y forward breakeven are all indicating market expectations of fewer rate hikes in the year of 2019 compared to three rate rises predicted in the September "dot plot" forecasts.

“Global major central banks shifting stance and easing US-China trade tensions are expected to buoy EM Asian currencies in general next year; Meanwhile, we keep a close eye on the general elections in India, Indonesia and Thailand and external uncertainties,” said Qi Gao, Asia FX strategist at Scotiabank in a note to client.

Scotiabank further added, we saw signs of easing US-China trade tensions. US President Donald Trump tweeted Saturday that China "wants to make a big and very comprehensive deal," adding that "it could happen, and rather soon!" Earlier on Friday, China said it will temporarily remove the additional 25 percent tariffs on car imports from the US for three months starting 1 January, citing the December 1 meeting between US President Donald Trump and Chinese leader Xi Jinping. The White House also officially delayed a rise in tariffs on USD 200 billion of products to 2 March from 1 January.

Meanwhile, the S&P/ASX 200 index traded 0.97 percent higher at 5,583 by 03:20 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -64.46 (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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