Australian bonds sink tracking U.S. Treasuries after Italy’s political scar heals slightly, credit concerns ease

The Australian government bonds sunk during Asian session Thursday, tracking a similar movement in the United States counterpart and other global peers after the political situation in Italy started to improve, with attempts being made to form a coalition government after days of indecisiveness. Also, the latest debt market auction in Italy turned out better than market anticipations, which eased investors’ concerns for credit growth.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, jumped 2 basis points to 2.65 percent, the yield on the long-term 30-year Note hovered around 3.18 percent and the yield on short-term 3-year traded 1 basis point up at 1.98 percent by 04:00 GMT.

Italy's political woes have rattled global financial markets in recent sessions, amid renewed concerns over the prospect that snap elections in Rome could be framed as a de facto referendum on the country's role in Europe.

The bond markets stabilized somewhat on Wednesday following the major moves on Tuesday that were largely sparked by fears a political impasse could lead to new elections that would serve as a de facto referendum on euro membership.

Hopes that a vote can be avoided emerged on Wednesday after reports claimed a populist trio of the 5 Star Movement, the League, and Brothers of Italy were pushing to form a coalition government.

Meanwhile, the S&P/ASX 200 index traded 0.30 percent lower at 6,015.50 by 04:10 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -55.74 (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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