Australian bonds plunge on subdued demand as markets wager UK snap election’s positive outcome

The Australian government bonds plunged Thursday as investors moved away from safe-haven assets amid geopolitical tensions that were offset by a more positive market reaction to the sudden announcement of the United Kingdom’s snap election, to be held on June 8. Investors are looking forward to a more flexible and fluid exit of Britain post this election.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 5 basis points to 2.51 percent, the yield on the 15-year note climbed 5-1/2 basis points to 2.92 percent and the yield on short-term 2-year traded 3 basis points higher at 1.78 percent by 03:50 GMT.

Global demand for safe-haven assets suffered as markets remain optimistic that the snap election in the UK could lead to a more favorable outcome for investors from coming Brexit negotiations. Further, the AUD was also pressured by fresh falls in iron ore, the country's single biggest export earner, as worries about a supply glut in China pulled prices to 13-week lows.

Lastly, stronger-than-expected commodity prices are expected to boost the Commonwealth Government’s revenue but there will be offsetting factors due to lower-than-expected wages growth, new policy announcements and adjustments that the Government has had to make to its current policies.

Meanwhile, the ASX 200 index traded 0.22 percent up at 5,796.50 by 03:50GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -22.49 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex