Australian bonds slump tracking weakness in U.S. Treasuries; U.S. 10-year note hovers around 3 pct mark

Australian government bonds slumped on Wednesday tracking weakness in the U.S. Treasuries amid rising expectations of gradual policy tightening form the Federal Reserve this year and next. The U.S. 10-year Note yield hovered around the 3 percent mark.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 5 basis points to 2.790 percent, the yield on the long-term 30-year Note surged 3-1/2 basis points to 3.288 percent and the yield on short-term 2-year up nearly 2-1/2 basis points to 2.041 percent by 03:00 GMT.

In the United States, Treasuries saw modest downward pressure during a relatively quiet Tuesday session light on data of great significance. On the data front, markets received the April NFIB small business optimism index, edging higher to 104.8, versus 104.7 in March and JOLTS US job openings increasing to 6.550 million in March, marking its highest reading on record.

With respect to geopolitical developments, U.S. President Donald Trump officially announced intentions to pull the U.S. out of the Iran nuclear deal, planning to reinstall previously waived sanctions alongside plans to enact new economic penalties. Markets now look ahead to a slightly greater flow of data on Wednesday, highlighted by producer prices data, followed by a 10-year Note auction later in the session.

Moreover, the bonds investors also shrug-off dovish policy statement from the Australian central bank release last week on Friday, where the RBA noted that March quarter inflation outcomes were broadly in line with the forecast in the February Statement on Monetary Policy and confirmed that inflation remains low but stable. The low inflation outcomes reflect spare capacity in the economy and the associated low wages growth, as well as the ongoing downward pressure on retail prices due to increased competition in the sector.

Meanwhile, the S&P/ASX 200 index traded 0.21 percent lower at 6,072.5 by 03:20 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -65.30 (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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