Australian bonds slump after producer price index jumps above market expectations; RBA policy decision in focus

Australian government bonds slumped on the last trading day of the week Friday after the country’s producer price index for the fourth quarter of 2017 jumped beyond market expectations and higher than the prior figures as well. Investors will now be focussing on the Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled to be unveiled by early next week for further direction in the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 4 basis points to 2.82 percent, the yield on the long-term 30-year note surged 2 basis points to 3.43 percent and the yield on short-term 2-year traded tad higher at 2.01 percent 04:25GMT.

Final demand producer prices in Australia were up 0.6 percent on quarter in the fourth quarter of 2017, the Australian Bureau of Statistics said on Friday, following the 0.2 percent gain in the three months prior.

The increase was mainly due to rises in the prices received for petroleum refining and petroleum fuel manufacturing (+11.9 percent), heavy and civil engineering construction (+0.7 percent) and building construction (+0.4 percent).

Lastly, while the RBA is expected to remain on hold, the tone of the RBA commentary will be more upbeat after a positive run of data both domestically and globally, ANZ Research reported.

Meanwhile, the S&P/ASX 200 index traded 0.70 percent higher at 6,062.5 by 04:30 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -61.51 (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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