Australian 10-year bond yields hit 4-week low after RBA slightly downgrades growth forecast in policy statement

The Australian 10-year bond yields reached its highest in our weeks Friday after the Reserve Bank of Australia (RBA) slightly downgraded its economic growth forecast for the country for this year. However, a tad higher-than-expected retail sales for the month of June was largely shrugged off by investors.  

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 4 basis points to 2.64 percent, the yield on 15-year note plunged nearly 4-1/2 basis points to 2.94 percent while the yield on short-term 2-year traded nearly flat at 1.79 percent by 03:30 GMT.

In its quarterly statement on monetary policy released this morning, the RBA sees growth in December 2017 of 2 to 3 percent edging back from 2.5 to 3.5 percent in the previous forecast in May.

"The economy is expected to grow at an annual rate of around 3 per cent over the next couple of years which is a bit higher than estimates of potential growth," the RBA noted.

In contrast, according to the Australian Bureau of Statistics (ABS), Australian retail sales rose by 0.3 percent in seasonally adjusted terms, topping expectations for a gain of 0.2 percent. At AUD26.15 billion, the value of nominal sales was the highest on record, rising by a massive AUD490 million from three months earlier. The solid result saw the year-on-year pace of sales accelerate to 3.8 percent, the fastest since April 2016.

Meanwhile, the S&P/ASX 200 index traded 0.04 percent higher at 5,668.50 by 03:30 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 17.54 (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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