Australian bonds jump on expectations of softer Q1 GDP; investors await RBA’s policy decision

The Australian bonds started the week on a strong note, following expectations of a softer gross domestic product (GDP) of the country in the first quarter of this year and as investors wait to watch the Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled to be unveiled  on June 6 by 04:30GMT.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped nearly 3 basis points to 2.39 percent, the yield on 15-year note plunged 3-1/2 basis points to 2.77 percent while the yield on short-term 2-year traded 1-1/2 basis points lower at 1.57 percent by 04:20 GMT.

Analysts estimate Australia's AUD1.7 trillion (USD1.27 trillion) annual GDP grew a slim 0.2 percent in the first quarter, a setback from the previous quarter's brisk 1.1 percent. The GDP report, due out on Wednesday, is also forecast to show annual growth slowed to 1.6 percent from 2.4 percent. However, few doubted the economy to have shredded growth in Q1, following disappointment in retail sales and home building.

 Further, the RBA is expected to keep rates on hold at a record-low of 1.5 percent, where they have been stuck since May last year. The persistent weakness in wages along with the ongoing lack of inflationary pressure, however, will continue to worry the RBA.

Meanwhile, the ASX 200 index traded down 0.73 percent at 5,752.50 by 05:10GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -36.71 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex