Australian bonds gain following weaker-than-expected Q4 GDP data

Australian bonds gained on Wednesday following weaker-than-expected Q4 GDP data, which is weakest in last three quarters. Also, rising concerns over trade war after President Donald Trump announced to impose tariffs on imports of steel and aluminum last week supported the bonds prices.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 2 basis points to 2.815 percent, the yield on the long-term 30-year note dipped 2 basis points to 3.199 percent and the yield on short-term 2-year down 2 basis points to 1.965 percent by 02:50 GMT.

Australia’s gross domestic product (GDP) grew 0.4 percent quarter on quarter in the three months through the end of December, slowing from 0.7 percent growth in the previous quarter, according to the Australian Bureau of Statistics. That was below a median of economists’ estimates compiled by Reuters forecasting 0.6 percent growth.

In year-on-year terms, GDP grew 2.4 percent in the fourth quarter, short of the 2.5 percent growth forecast and at a slower rate than the 2.8 percent pace recorded in the previous quarter.

On Tuesday, the Reserve Bank of Australia (RBA) kept its benchmark interest rate on hold at a record low of 1.50% for the 17th straight meeting, widely in line with what markets had initially anticipated. The decision was broadly judged as being in line with the country's sustainable growth and reaching the central bank's inflation goal over time.

In the United States, Treasuries were little changed during a relatively quiet session light on data of great significance. With respect to policy, these concerns were echoed by Dallas Fed President Kaplan, indicating that trade with Mexico and Canada remains a critical component in supporting jobs in the US. Markets now look ahead to a greater flow of data on Wednesday, highlighted by the ADP employment estimate, international trade balance, non-farm productivity/unit labor costs, Beige Book and consumer credit releases.

Meanwhile, the S&P/ASX 200 index traded 1.02 percent lower at 5,897.5 by 03:00 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 44.90 (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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