Australian bonds witness mild sell-off as RBA keeps official cash rate steady; Q3 GDP in focus

The Australian government bonds slumped Tuesday as the Reserve Bank of Australia in its December monetary policy meeting kept its official cash rate (OCR) unchanged at record low of 1.50 percent, as expected.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose more than 1 basis points to 2.82 percent, the yield on 15-year note climbed 1-1/2 basis points to 3.27 percent and the yield on short-term 2-year bounced 1/2 basis point to 1.86 percent by 04:00 GMT.

The Reserve Bank of Australia in its last monetary policy statement for 2016 left its benchmark interest rate steady at 1.50 percent after cutting twice in May and August. Also, the central bank in its monetary policy statement noted that steady policy rate is consistent with economic growth, inflation targets and global economy growing at lower than average pace.

Further, the central bank noted that the world’s second-largest economy has steadied and economic conditions in China supported by growth in infrastructure and property construction but medium-term risks remain. Also, mentioned that home prices rising briskly in some markets and global outlook for inflation more balanced than "for some time".

Lastly, investors will remain keen to focus on the upcoming third-quarter gross domestic product of Australia, scheduled to be released on December 7 is expected to show a sharp slowdown, with the preliminary estimate being flat q/q growth. Also, it is likely to remain below the RBA’s implied forecast. We foresee that the Australia’s GDP is expected to drop to 2.3 percent from 3.3 percent in Q2, well below the RBA’s implied forecast of approximately 3 percent.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.12 percent lower at 5,440.50 by 04:10 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at +46.84 (higher than +75 represents bullish trend).