Australian bonds gain on global growth worries

The Australian government bonds gained on Thursday as investors poured into safe-haven assets amid deepening global economic growth fears alongwith slowdown in Chinese economy. Nevertheless, data was only part of the story as greater focus was paid to struggles in equities. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 2 basis point to 2.282 percent and  short-term 2-year bonds yield also dipped 1-1/2 basis point to 1.668 percent by 05:05 GMT.

The final Markit US manufacturing PMI reading decreased to 50.7 for May (preliminary 50.5), versus the 50.8 reading seen for April. This comes in just above market expectations for a 50.5 result.

In addition, China's Caixin manufacturing PMI fell to 49.2 in May from 49.4 in April, in line with estimates and official manufacturing PMI unchanged at 50.1 in May, beating estimates for 50. Moreover, official non-manufacturing PMI fell to 53.1 in May from 53.5 in April.

Yesterday, Australia’s first quarter gross domestic product surpassed market expectations, rising the fastest in almost three years that suppressed hopes of a rate cut by the Reserve Bank of Australia in its policy meeting next week. Gross domestic product (GDP) grew 1.1 percent in the three months to March, from the previous quarter when it rose an upwardly revised 0.7 percent, data released by the Bureau of Statistics showed Wednesday.

Further, annual growth surged 3.1 percent, from a downwardly revised 2.9 percent, maintaining the RBA’s forecast of 2.5-3.5 percent by June. Moreover, the Australian dollar appreciated almost half a US cent post the data was released, beating economic expectations, thereby reducing the need for any rate cut. However, market had anticipated a rise of 0.8 percent GDP q/q and 2.8 percent on year.

Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading down 0.97 percent, or 52 points, at 5,282.5 by 05:05 GMT.