Australian bonds suffer tracking U.S. peer on renewed hopes of U.S.-China trade deal

The Australian bonds suffered during Asian session of the second trading day of the week Tuesday, tracking a similar movement in the U.S. Treasuries as investors placed bullish bets on hopes of a U.S.-China trade deal, scheduled to be signed on Wednesday.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped nearly 4 basis points to 1.252 percent, the yield on the long-term 30-year bond surged 3-1/2 basis points to 1.865 percent and the yield on short-term 2-year gained 1-1/2 basis points to 0.817 percent by 02:30GMT.

The US’ decision to lift the currency manipulator label from China ahead of the signing of a Phase 1 trade deal may be taken by market as risk-supportive. The S&P500 rallied 0.7 percent, led by tech stocks on optimism about the Phase 1 trade deal signing and the upcoming earnings season, while UST bonds declined amid heavy issuance that took the 10-year bond yield up to 1.84 percent, OCBC Treasury Research reported.

"The removal of currency manipulator label by US Treasury is largely symbolic in our view as the label has limited impact on the market so far. Nevertheless, it is a good gesture ahead of the signing of phase one trade deal tomorrow. The US’s acknowledgement on China’s enforceable commitments to refrain from competitive devaluation may add more positive sentiment to already appreciating RMB," the report further commented.

Meanwhile, the S&P/ASX 200 index traded tad 0.26 percent higher at 6,891.50 by 02:35GMT.