Australian bonds plunge after RBA keeps interest rate on hold; 10-year yield hits 6-month high

The Australian government bond plunged Tuesday after the Reserve Bank of Australia kept its official cash rate unchanged at a record low of 1.50 percent, citing recovery in consumer inflation and stronger economic growth.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 4 basis points to 2.395 percent (highest since May), the yield on 15-year note jumped 3 basis points to 2.754 percent and the yield on short-term 2-year also climbed 3 basis points to 1.686 percent by 04:30 GMT.

The Reserve Bank of Australia left its cash rate unchanged at 1.50 percent following its November meeting as widely expected by financial markets. The RBA Governor Philip Lowe in its monetary policy decision said that the global economy is continuing to grow, at a lower than average pace. Labour market conditions in the advanced economies have improved over the past year, but growth in global industrial production and trade remains subdued.

Further, he said that commodity prices have risen over recent months, following the very substantial declines over the past few years. The higher commodity prices have supported a rise in Australia's terms of trade, although they remain much lower than they have been in recent years.

Lastly, investors will remain keen to focus on the upcoming Statement of Monetary Policy (SoMP), trade balance and retail sales.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.47 percent lower at 5,253.5 by 04:30 GMT.