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The Australian government bonds plunged Friday, following weakness in the U.S. debt market. Also, expectations of steady policy rate from the Reserve Bank of Australia (RBA) in its next week’s monetary policy meeting drove-out investors from safe-haven buying.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 6 basis points to 2.86 percent, the yield on 15-year note also climbed 6 basis points to 3.28 percent and the yield on short-term 2-year inched 2-1/2 basis points to 1.89 percent by 04:30 GMT.
The Australian bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield climbed to 2.43 percent, highest since July last year.
Moreover, the Reserve Bank of Australia (RBA) is widely expected to hold its official cash rate (OCR) steady at record low level of 1.50 percent in its monetary policy meeting scheduled on December 6. The central has already signalled in its last policy statement that it is done with cutting interest rate further to control price rise in the housing sector.
In terms of recent economic data, Australia’s retail sales came in above expectations again in October, implying a better start to fourth-quarter spending. Retail sales grew 0.5 percent in sequential terms in October, as compared with the market expectation of a rise of 0.3 percent and September’s rise of 0.6 percent. Australia’s retail sales are expanding at an annual rate of 3.5 percent.
In addition, Crude oil prices fell more than 1 percent as investor booked profit after a long rally post-OPEC deal. The International benchmark Brent futures fell 1.09 percent to $53.35 and West Texas Intermediate (WTI) dipped 0.80 percent to $50.65 by 04:30 GMT.
The Organization of the Petroleum Exporting Countries (OPEC) has agreed to cut production by roughly 1.2 Mb/d to 32.5, which equates to a 4.5-4.6 percent cut per member country. We believe the outcome is consistent with our view of what OPEC production levels were expected to be in 2017 irrespective of the deal reached yesterday, reported Barclays in its research note.
In other words, the meeting is highly unlikely to substantially affect the oil market balance. Compared with our assessment of OPEC supply last month, we have adjusted our first-quarter of 2017 production estimate lower by 350 kb/d, which will result in a slightly steeper draw than our balances were forecasting, they added.
Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.73 percent lower at 5,452.50 by 04:40 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index remained highly bearish at -117.07 (lower than -75 represents bearish trend).
