The Australian government bonds slumped Monday as investors moved away from safe-haven buying amid gains in riskier assets including crude oil and equities. Also, investors will remain keen to focus on the tone of the Reserve Bank of Australia (RBA) in the upcoming December meeting minutes in an attempt to understand future movement in the central bank’s borrowing cost.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.86 percent, the yield on 15-year note jumped 1-1/2 basis points to 3.34 percent and the yield on short-term 2-year climbed 1 basis point to 1.93 percent by 04:40 GMT.
We foresee that the bond prices will keep drifting between small gains and losses in quiet trading due to a long Christmas holiday.
The Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which is well below the Reserve Bank of Australia's target. Crude oil prices jumped as investors expect tighter crude oil market in 2017. The International benchmark Brent futures rose 0.71 percent to $55.60 and West Texas Intermediate (WTI) climbed 0.89 percent to $52.36 by 04:50 GMT.
Moreover, the Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range last Wednesday, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.
Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.
In terms of recent data, released Friday, Australia’s November employment jumped to 39,100, higher than the previous print of 15,200. This beats market expectations for an increase of 20,000. However, the unemployment rate rose to 5.7 percent in November, from down 5.6 percent in October.
Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.68 percent higher at 5,521.5 by 04:50 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral -67.02 (lower than -75 represents a bearish trend).
