Australian bonds gain on disappointing retail sales, ASX200 post sharp losses

The Australian government bonds gained Tuesday following weaker-than-expected retail sales amid sharp losses in equities.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell more than 4-1/2 basis points to 2.72 percent, the yield on 15-year note plunged 5-1/2 basis points to 3.16 percent and the yield on short-term 2-year moved down 5 basis points to 1.86 percent by 04:45 GMT.

Australian retail sales stumbled in November, rising just 0.2 percent m/m, the weakest result since July, following average monthly rises of 0.6 percent over the previous three months. However, in annual terms, sales were up 3.3 percent y/y. In trend terms, retail sales have risen by 0.4 percent m/m for four consecutive months.

Moreover, the ASX200 index witness sharp losses in early morning session, dripping nearly 1 percent tracking Wall Street losses.  The Dow Jones Industrial Average fell 0.38 percent to 19,887.38 and S&P 500 index down 0.35 percent to 2,268.90. However, the Nasdaq Composite index rose 0.19 percent to 5,531.82 by 04:55GMT.

The Australian bonds have been closely following movements in the U.S. debt market. The U.S. benchmark 10-year bond yields fell 6bps to 2.36 percent, following comments by United Kingdom Prime Minister Theresa May on the developments concerning the process of Brexit, which shifted investors toward safe-haven buying, thus pushing bond prices higher.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.56 percent lower at 5,720 by 05:00 GMT, while at 5:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 56.94 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex