Australian bonds trade marginally lower ahead of Yellen’s Jackson Hole speech

The Australian government bonds traded modestly lower Thursday as investors await the Federal Reserve Chair Janet Yellen’s Jackson Hole speech scheduled to be held on Friday.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose more than 1 basis point to 1.923 percent and the yield on short-term 2-year climbed 1 basis point to 1.448 percent by 04:40 GMT.

The Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of Australia's target. Additionally, tumbling crude oil prices limited the growth in bond yields.

The crude oil prices declined as US stockpiles increased by 6.6 million barrels in the week ended August 19 to a record high of 1.4 billion barrels, said the Energy Information Administration. Also, Iraq prepared to increase its exports and renewed concerns that upcoming producer talks will not rein in oversupply. Also, worries about expanding Chinese fuel exports dragged oil prices. The International benchmark Brent futures fell 0.10 percent to $49.00 and West Texas Intermediate (WTI) dipped 0.04 percent to $46.75 by 04:40 GMT.

Moreover, ANZ in its weekly report mentioned that the domestic economic data in the last few weeks has been more positive. ANZ’s consumer confidence has risen to a three year high, the unemployment rate fell by 0.1 percentage point, and auction clearance rates in Sydney and Melbourne have jumped sharply. Markets have been reticent to reduce OIS pricing to reflect these better metrics, partly, we suspect, because the AUD has remained elevated and pricing for a 2016 Fed hike has remained decumbent.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.22 percent lower to 5,524.5 by 04:40 GMT.