Australian 2-year bond yield hits 1-month high tracking U.S. Treasuries; June employment report in focus

Australian government bonds traded narrowly mixed on Wednesday ahead of the June employment report. But, following the weakness in the U.S. Treasuries after Federal Reserve Chair Jerome Powell upbeat testimony to Congress, the short-term Australia 2-year bond yield to highest in one month.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 1 basis points to 2.652 percent, the yield on the long-term 30-year Note dipped nearly 2 basis points to 3.128 percent and the yield on short-term 2-year up 1/2 basis point to 2.034 percent by 03:30 GMT.

In the United States, Treasuries slumped after Fed Chairman Jerome Powell expressed an optimistic about the U.S. economy in his testimony to Congress on Tuesday.

“The 2-10-year UST yield curve flattens further in response to Powell’s upbeat economic outlook that supports more rate hikes, with the 2-year UST yield rallying through 2.60%,” said Qi Gao, Currency Strategist - EM Asia at Scotiabank.

Markets would now focus on the June employment report due for Thursday. Jobs are forecast to increase by 17K and jobless rate is anticipated to remain flat at 5.4%.

On the RBA monetary policy front, St.George Bank noted in its Wednesday’s daily morning report “the minutes for the Reserve Bank (RBA) July board meeting did not suggest any major shift in the bank’s assessment of the domestic economy. We remain comfortable in expecting the RBA to stay on the sidelines for an extended time.”

Meanwhile, the S&P/ASX 200 index traded 0.27 percent higher at 6,196.5 by 03:30 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -25.71 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex