Australian 10-year bond yields at 4-week high as risk-off sentiment continues after North Korea’s missile launch

The Australian 10-year bond yields surged to a level last seen on August 3 as investors continue to engage in risk averse trading after North Korea fired a test missile over Japan on Tuesday. Japan is the world's biggest creditor nation and there is an assumption that investors there will repatriate funds at times of crisis.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 7 basis points to 2.69 percent, the yield on 15-year note surged 6-1/2 basis points to 2.99 percent and the yield on short-term 2-year also climbed nearly 6 basis points higher at 1.89 percent by 02:50 GMT.

North Korea fired a missile that passed over northern Japan, the latest act of provocation by Pyongyang that has ramped up tensions in the region over the past month. That has forced funds to pare back riskier positions in carry trades which typically favour the higher-yielding antipodeans.

The United States, Japan and South Korea considered that launch to have been a ballistic missile test while North Korea said it was a rocket carrying a communications satellite into orbit. Lastly, concerns about damage from Tropical storm Harvey and its potential impact on the US economy has also weighed on investors’ risk sentiments.

Meanwhile, the S&P/ASX 200 index eased 0.30 percent to 5,640.50 by 02:50 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 174.61 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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