Australian bonds trade flat as investors await RBA policy decision

The Australian government bonds traded nearly flat Friday as investors await the Reserve Bank of Australia (RBA) monetary policy decision. Also, market also await the Friday's US jobs data as it could be used to anticipate the Fed's most likely step to raise interest rate.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around at 1.903 percent and the yield on short-term 2-year bounced 2 basis points to 1.494 percent by 05:00 GMT.

The Reserve Bank of Australia is scheduled to release its monetary policy decision on September 5 and it is widely expected to leave its interest rate unchanged at 1.50 percent. However, we foresee that there is a higher possibility that the central bank will lower its key policy rate in 2016 as further easing seems warranted due to continued subdued consumer inflation.

Moreover, third quarter consumer inflation data will be key in regards to future monetary policy expectations and it is not released until October and therefore although the RBA will likely leave policy unchanged at their September meeting. On the other hand, it is worth noting that if third quarter CPI disappoints, official cash rate cut is unavoidable.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.61 percent lower to 5,360.5 by 05:00 GMT.