Australian bonds gain on expectations of weak employment report

Australian bonds gained Wednesday as investors expect weak employment report in September on October 19. In addition, investors still digest little dovish October Reserve Bank of Australia (RBA) meeting minutes.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 4 basis points to 2.734 percent, the yield on the long-term 30-year note also slid nearly 4 basis points to 3.508 percent and the yield on short-term 2-year traded nearly 2 basis points lower at 1.899 percent by 02:30GMT.

Australia’s labour market report is scheduled to be released on Thursday at 00:30 GMT. According to recent Reuters poll, the employment change for September is expected to decline to 15K, down from 54.2K in August. If realized, it will be the lowest in 3-months. On the other hand, poll participants did not expect any change in the unemployment rate in last month at 5.6%.

The October minutes released Tuesday noted that the RBA policymakers see no “mechanical implications” for Australian rates stemming from tighter monetary policy elsewhere. The central bank also showed some sign of worry about the effects of excessive Australian dollar strength. The AUD has slipped in the last few months, but AUD/USD remains close to this year’s peak, which is also a 2-year high.

The RBA added that the labour market conditions likely to remain firm, it expressed confidence about the outlook for wage growth and household consumption. Also, it noted that domestic economic conditions will determine when it decides to hike interest rates. And, given its commentary on Australia’s inflation outlook, it seems that could still be some way off at this point.

In the overnight session, the yield on the two-year U.S. Treasury note breached its highest level in almost a decade on Tuesday, reflecting investors' confidence that the Federal Reserve will maintain a steady course of interest-rate increases.

Meanwhile, the S&P/ASX 200 index rose 0.19 percent to 5,900.60 by 02:30 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 151.744 (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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