Australian bonds plunge as underlying inflation stabilizes in December quarter

The Australian bonds plunged in early trading session Wednesday as underlying inflation appeared to have stabilized in the December quarter, suggesting that the sharp disinflationary forces that have been weighing on prices are abating.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 3 basis points to 2.74 percent, the yield on 15-year note also rose 3-1/2 basis points to 3.18 percent and the yield on medium-term 5-year edged 1/2 basis point higher to 2.28 percent by 05:00 GMT.

Australia’s headline CPI rose by 0.5 percent q/q in Q4, in line with market expectations. Underlying inflation appears to have stabilised. In six month-end annualised terms, core inflation was 1.7 percent in Q4 2016, compared with 1.5 percent in Q2 2016.

Further, the Moody’s rating agency has re-affirmed the country’s credit rating at 'AAA', while keeping outlook stable in the near term.

Lastly, investors are now looking forward to the release of trade balance data next week for detailed direction in the debt market.

Meawhile, the ASX200 index traded 0.28 percent down at 5,615.50 percent at 05:20GMT, while at 5:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -103.56 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex