Australian bonds jump as Trump investigation report, weak inflation figures overcast Fed hike

The Australian bonds rallied Thursday amid lingering inflation concerns even after the Federal Reserve raised its benchmark interest rate by 25 basis points to 1.00-1.25 percent, suggesting that weak readings are unlikely to persist in the near-term.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 4-1/2 basis points to 2.37 percent, the yield on 15-year note plunged nearly 6 basis points to 2.73 percent while the yield on short-term 5-year traded flat at 1.66 percent by 04:00 GMT.

Asian stocks slumped as oil touched the lowest level since November. Energy and raw-material shares had the biggest declines on the MSCI Asia Pacific Index as oil traded below USD45 a barrel.

Further, Australia’s debt market followed a rally in Treasuries as data showed U.S. consumer prices excluding volatile food and fuel had the smallest year-over-year gain since May 2015. U.S. equity futures fell after a report that investigators are probing whether President Donald Trump attempted to obstruct justice. The Aussie dollar jumped after an encouraging jobs report.

A surprise slowdown in U.S. inflation so far this year is tightening monetary conditions a lot faster than Federal Reserve officials wanted. Inflation data released Wednesday by the U.S. Labor Department showed the so-called 'core' inflation rate, that excludes volatile food and energy components, softened to 1.7 percent in May, down from 2.3 percent in January.

Meanwhile, the ASX 200 index traded 0.73 percent lower at 5,714.50 by 04:20GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 106.45 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex