Australian bonds slump on profit booking ahead of holidays; 10-year yield jumps 5bps

Australian government bonds slumped across the curve during early Asian session Friday as investors cashed in profits by closing their short positions ahead of the holidays.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 5 basis points to 2.381 percent, the yield on the long-term 30-year bond also jumped 5 basis points to 2.859 percent and the yield on short-term 2-year up 5 basis points to 1.985 percent by 03:10GMT.

“Risk off continued as the FOMC decision and concern over the growth outlook weighed; US and euro equities lower; but US Treasury yields up. In a volatile session, Treasury yields pushed higher and the curve flattened to a new cyclical low. Domestic markets will be fairly quiet with the combination of high funding conditions and the end of year putting a dampener on activity,” noted ANZ economists in their last morning note of 2018.

The bank further noted that the Australian dollar (AUD) regained some of yesterday’s losses as the U.S. dollar was sold off broadly. With the major events for the week now behind us, holiday trading conditions will dominate.

“Oil is trading on macro and technical factors rather than fundamentals. This should keep prices under pressure for the meantime,” ANZ added.

Meanwhile, the S&P/ASX 200 index traded 0.74 percent lower at 5,388.5 by 03:20 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at -97.24 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex