Australian bonds steady in subdued trade; focus on next week’s policy meeting

The Australian government bonds were little changed on Thursday during a relatively quiet session that saw little data of much significance. The yield on the benchmark 10-year Treasury note, which moves inversely to its price remained steady at 2.007 percent and the yield on short-term 2-year note hovered around 1.608 percent by 05:20 GMT.

Australia May job vacancies fell -1.9 percent m/m from up 2.7 percent m/m in April and private sector credit rose 0.4 percent m/m, against market expectations of 0.5 percent, as compared to 0.5 percent in April.

“Yields on Australian bond futures also rose as US rates markets have reserved gains following the Brexit vote last week," the St George economists said in a note.

Markets will remain keen to focus on the next weeks Reserve Bank of Australia monetary policy decision scheduled to take place on Tuesday, July 5 at 04:30 GMT. The RBA will release latest retail sales and international trade figures on the same day.

We foresee that the Reserve Bank will remain on hold although heightened global risks suggest a higher probability of a rate cut in coming months. In addition, the RBA would prefer to have an up-to-date reading on inflation pressures, which suggests any upcoming cut would be more likely in August after the release of the Q2 CPI.

Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading up 0.37 percent, or 19 points, at 5,184 by 05:20 GMT.