Australian bonds plunge on growing investor confidence in the country’s economic outlook; RBA Lowe’s speech in focus

The Australian bonds plunged Wednesday as growing investor confidence in the Australian economic outlook has pushed rates on government bonds up to their highest level in six months. Also, investors will now be looking forward to a speech from Governor Philip Lowe, scheduled on September 21 by 05:10GMT.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2 basis points to 2.84 percent, the yield on the 15-year note climbed 1-1/2 basis points to 3.13 percent and the yield on short-term 2-year also traded nearly 2 basis points higher at 2.03 percent by 03:00GMT.

Although government bond rates are rising everywhere, as major central banks move closer to unwinding their extraordinary monetary support and raising rates, Australian yields are rising more than most. Rising bond rates means investors are selling bonds that deliver a steady interest stream and buying investment assets, such as shares or property that bring access to growth.

The Australian Office of Financial Management, the Treasury subsidiary that manages the government’s borrowing program, put the value of government bonds at the end of June at USD507.8 billion, up from USD426.2 billion a year earlier. Net debt, which subtracts the government’s financial assets, is USD354 billion. The budget predicted gross debt would peak at USD606 billion in 2019-20.

Meanwhile, the S&P/ASX 200 index fell 0.53 percent to 5,684.50 by 03:05 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 66.64 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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