Australian bonds surge tracking U.S. Treasuries following Brexit chaos, sell-off in stocks

Australian government bonds surged during Asian session Friday tracking a similar movement in the United States Treasuries, after chaos struck over Brexit negotiations as UK Minister Dominic Raab resigned on late Thursday.

Further, a sell-off in the equity market also led to investors’ crowd in the debt market, thus further leading to a rise in bond prices.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 4-1/2 basis points to 2.685 percent, the yield on the long-term 30-year bond slumped 4 basis points to 3.199 percent and the yield on short-term 2-year traded nearly 2-1/2 basis points lower at 2.063 percent by 03:45GMT.

According to a report from Reuters, "U.S. Treasury prices drifted higher on Thursday, sending yields to two-week lows across the curve, as Britain's draft agreement to exit the European Union ran into trouble, prompting investors to seek the safety of government bonds."

The Brexit turmoil has put at stake Prime Minister Theresa May’s leadership prospects. Some pro-Brexiters have called for a vote of no-confidence in May, saying the draft withdrawal agreement does not deliver on the referendum result, ANZ Research reported.

Further to that, a report from Financial Times stated that U.S. Trade Representative Robert Lighthizer has told some industry experts that another round of tariffs on Chinese imports has been put on hold as the two nations pursue talks.

Meanwhile, the S&P/ASX 200 index traded a tad lower at 5,753.5 by 03:50GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 8.01 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex