Australian bonds gain as investors wary ahead of U.S. CPI data, Yellen’s testimony

The Australian government bonds gained Thursday as investors remained cautious ahead of the United States consumer inflation data and Federal Reserve Chair Janet Yellen’s testimony, in an attempt to estimate the Fed's most likely policy step.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 6 basis points to 2.59 percent, the yield on 15-year note dipped 5 basis points to 3.012 percent and the yield on short-term 2-year slid 5 basis points to 1.77 percent by 05:00 GMT.

The Australian bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield tumbled 2-1/2 basis points to 2.200 percent.

Moreover, Australia October employment rose to 9.8K for the first time since August, recovered from the previous decline of 29K in September. This is also well below the market expectations of 15K increase. This was majorly supported by the rise in full-time employment, which jumped to 41.5K, after declining to 73K in the previous month. Also, the unemployment rate for October stood flat at 5.6 percent.

On Tuesday, the Reserve bank of Australia in its November meeting minutes mentioned that the underlying inflation is expected to return to normal levels over time and the Australian economy is seen growing close to potential over the next few quarters, before picking up further.

Further, the minutes repeated that a rising Australian dollar could complicate the economic transition and holding policy rate steady in November meeting was consistent with growth and inflation goals. It further mentioned that a steadier Chinese economy had reduced downside risks to the global growth outlook, while risks to global inflation outlook more balanced than for some time.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.70 percent higher to 5,343.5 by 05:10 GMT. While at 05:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at -40 (lower than the range of -75 for bearish trend).