Australian bonds rally as trade tensions continue to bother; eyes on April employment report

Australian government bonds rallied during Asian trading session Wednesday as trade tensions continued to bother market sentiments, thus pushing them towards safe-haven assets, while the country’s employment report for the month of April, scheduled to be released on May 16 by 01:30GMT, will be closely eyed for further direction in the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1-1/2 basis points to 1.695 percent, the yield on the long-term 30-year bond edged nearly 1 basis point down to 2.332 percent and the yield on short-term 2-year traded 1 basis point lower at 1.285 percent by 03:55GMT.

Global risk sentiments stabilized somewhat overnight as Trump reassured markets that the US has a “dialogue ongoing” with China and “I think it’s going to turn out extremely well”.  He also urged the Fed to “match” China “who is pumping money into their system and probably reducing interest rates” with a “little quantitative easing” and US growth would hit 5 percent, OCBC Treasury Research reported.

Fed responses to the heightened trade war uncertainties so far have been relatively measured - Williams opined that US trade tariffs are likely to “boost inflation by a few tenths over the next year…affect demand a bit and growth in the short run”, but “the economy is well positioned to deal with whatever events happen in the future” and “I don’t see any reason to have a bias up or downward in the current circumstances”, the report added.

Meanwhile, the S&P/ASX 200 index traded 0.26 percent up at 6,259.5 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at -85.68 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex