Australia 10-year bond yield falls to 6-week low as investors remain cautious amid global stock market rout

Australian government bonds gained across the curve during Asian session on Thursday as investors’ moved into safe-haven buying as stocks prices tumbled globally amid Italy worries. That pushed the Aussie 10-year bond yield to a 6-week low of 2.586 percent.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 5-1/2 basis points to 2.626 percent, the yield on the long-term 30-year bond dipped 2-1/2 basis points to 3.126 percent and the yield on short-term 2-year plunged 2 basis points to 2.002 percent by 03:50GMT.

Risk aversion escalated overnight. There did not seem to be an overriding factor behind the downturn in sentiment, although U.S. housing data disappointed. Share markets and bond yields fell, while the US dollar rose. Yields on US treasuries fell as weaker risk appetite boosted demand for government bonds. The U.S. 10-year yield dropped 6 basis points to 3.10 percent, while 2-year yields fell 5 basis points to 2.83 percent, said St.George Bank in its morning report.

“A volatile session overnight in Wall Street saw both the Dow and the S&P500 losing their year-to-date gains, while the Nasdaq lost 4.4 percent as tech stocks were battered amid growing growth and earnings concerns. With the ensuing flight to safety, the 10-year UST bond yield dipped to 3.1 percent and the USD firmed,” noted OCBC Bank in its daily Treasury outlook.

It will be a quiet data day in Australia and New Zealand.

Meanwhile, the S&P/ASX 200 index traded 0.25% lower at 5,683.5 by 04:00 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 10.47 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex