Australian bonds gain as fall in energy prices dim inflation outlook; firm U.S. Treasuries lend support

Australian government bonds gained on the first trading day of the week Monday as a fall in global crude oil prices weighed on the country’s inflation outlook, leading to a crowd in safe-haven instruments. Also, firmness in the United States Treasuries lent further support to bond prices

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2 basis points to 2.643 percent, the yield on the long-term 30-year bond fell nearly 2 basis points to 3.160 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points lower at 2.033 percent by 03:40GMT.

The risk averse tone continued on Friday as US markets reopened following the Thanksgiving holiday. Oil remained in focus, with a sharp decline in the oil price. The US stock market, bond yields and US dollar slipped on investor caution.

Further, the US stock market declined, as a fall in the oil price weighed on the energy sector. The Dow and the Nasdaq both fell 0.7 percent and the Nasdaq was down 0.5 percent. US government bond yields fell at the long end as stock market loses boosted demand for safe haven government bonds.

Oil prices plunged further amid concerns about strong supply while inventories remain high. The WTI oil price slumped USD4.20 to USD50.20 per barrel. This was its lowest since October 2017.

Meanwhile, the S&P/ASX 200 index traded 0.79 percent higher at 5,718.5 by 03:40GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -67.41 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex