Australian bonds trade narrowly mixed in subdued session; investors eye U.S-China trade talks

Australian bonds traded narrowly mixed in subdued Wednesday session as investors remain sidelined in any major deal ahead of the U.S.-China trade talks.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, traded flat at 2.546 percent, the yield on the long-term 30-year bond remained steady at 3.051 percent and the yield on short-term 2-year fell 1 basis point lower at 2.011 percent by 03:00GMT.

“The USD has weakened broadly over the past several sessions and losses are extending in response to President Trump’s latest comments on the Fed and his complaints about EU/China currency manipulation. While short-term Fed tightening expectations have remained largely unchanged, US Treasury yields have responded and softened to levels last seen in mid/early-July, eroding the fundamental underpinnings that have driven the bulk of the USD rally since mid-April,” noted economists at Scotiabank.

On Tuesday, the Reserve Bank of Australia (RBA) in its August meeting minutes noted that the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time. Based on the forecasts, members assessed that the current stance of monetary policy would continue to support economic growth and allow further progress to be made in reducing the unemployment rate and returning inflation towards the midpoint of the target.

In these circumstances, members continued to agree that the next move in the cash rate would more likely be an increase than a decrease. However, since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy, the RBA said.

“There were again no surprises in the Reserve Bank’s (RBA) minutes of the August meeting. It struck a similar tone to that provided in a recent commentary. The RBA continues to be comfortable with the outlook for the domestic and global economies, and presented mostly a balanced assessment of the risks,” said St.George Bank in its morning note.

“The commentary suggested some greater confidence in the outlook for consumer spending. Increases in the minimum wage, future tax cuts, and the improving labour market were highlighted as factors which had “reduced some of the uncertainty around the outlook for consumption”. Nonetheless, the RBA made a slight downgrade to its assessment of non-mining business investment.”

Meanwhile, the S&P/ASX 200 index traded 0.15 percent lower at 6,230.5 by 03:00GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 67.36 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex