Australian bonds tad lower as RBA Nov meeting minutes hint rate pause; Fed Dec rate hike probability jumps to 92 pct

The Australian government bonds traded a tad lower Tuesday after the Reserve Bank of Australia in its November meeting minutes signaled no further rate cut in the coming months.

Also, Treasury bubble collapsed as the probability of a December rate hike by the Federal Reserve jumped to 92 percent from previous 80 percent.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.671 percent, the yield on 15-year note jumped 3 basis points to 3.128 percent and the yield on short-term 2-year climbed 2 basis points to 1.823 percent by 04:40 GMT.

The Reserve bank of Australia in its November meeting minutes mentioned that the underlying inflation is expected to return to normal levels over time and the Australian economy is seen growing close to potential over the next few quarters, before picking up further.

Further, the minutes repeated that a rising Australian dollar could complicate the economic transition and holding policy rate steady in November meeting was consistent with growth and inflation goals. It further mentioned that a steadier Chinese economy had reduced downside risks to the global growth outlook, while risks to global inflation outlook more balanced than for some time.

The Australian bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield bounced to 2.22 percent for the first time in 2016. Also, a heavy sell-off in government bonds was supported by rising expectations that the U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

Last week, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Investors again revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 84 percent.

Also, the fall in the number of people opting for unemployment benefits has strengthened the probability of a December interest rate hike by the Federal Reserve.

Lastly, investors remain keen to focus on the upcoming RBA Governor Lowe Speech and October unemployment rate on Friday.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.24 percent lower to 5,328.5 by 04:50 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at -52.35 (lower than the range of -75 for bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex