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Australian bonds tad higher ahead of RBA’s SoMP; movement in U.S. Treasuries eyed

Australian bonds traded a little firmer Wednesday as markets awaited the Statement on Monetary Policy (SoMP) from the Reserve Bank of Australia. In addition, development in the U.S. Treasuries remained in focus.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.589 percent, the yield on the long-term 30-year note declined nearly 1 basis point to 3.361 percent and the yield on short-term 2-year remained steady at 1.791 percent by 02:00 GMT.

On Tuesday, the RBA maintained its key benchmark rate at a record low of 1.50% for the 15th consecutive months at its monetary policy meeting held today, as was widely anticipated by market participants. The decision was broadly judged as being in line with the country's sustainable growth and reaching the central bank's inflation goal over time. Further, policymakers maintained optimism over the country's labor market, which has been the prime focus of board members since the start of 2017.

Looking ahead, we think that an interest rate change through the first half of next year is off the table, as inflation will likely remain below the target zone in 2018 as well as 2019. In any case, markets will focus on the RBA Statement on Monetary Policy scheduled to be released on Friday at 00:30 GMT.

U.S. Treasury yields fell on Tuesday, flattening the yield curve to a level not seen in a decade, as $24 billion worth of three-year government debt, the first leg of this week's $64 billion quarterly refunding, fetched average demand. The drop in longer-dated yields with 30-year yields touching a six-week low pinned short-term gauges of Treasury market volatility near all-time lows.

The two-year yield was a tad higher at 1.629 percent, while the 10-year yield slipped 1 basis point to 2.307 percent. This still narrowed their yield spread to just over 67 basis points, which was the tightest since  November 2007, Reuters data showed.

Additionally, markets receive 10-year Note and 30-year Bond auctions on Wednesday and Thursday, respectively.

Meanwhile, the S&P/ASX 200 index traded 0.36% higher at 5,997.5 by 02:00 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at -93.28 (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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