Australian bond yields rise on hopes of U.S.-China trade deal, weak Chinese growth limits further upside

Australian government bonds slumped across the curve during Asian trading session Monday on hopes of an end to the U.S.-China trade spat. However, weak Chinese economic growth data limited further upside.

Global risk appetite got a boost on news of progress in U.S.-China trade negotiations amid market speculation that China has offered to eliminate its trade surplus with U.S. by 2024.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1-1/2 basis points to  2.326 percent, the yield on the long-term 30-year bond climbed 1/2 basis point to 2.852 percent and the yield on short-term 2-year up about 2 basis points to 1.909 percent by 03:50 GMT.

“Investor sentiment lifted on hopes of progress on US-Chinese trade tensions. A news report that China had offered to reduce its trade surplus with the US to zero by 2024 was welcomed by financial market participants. The U.S. stock market, bond yields and dollar all gained on Friday night,” noted St.George Bank.

“The lift in investor sentiment dimmed the safe-haven appeal of government bonds, pushing yields higher. The yield on the 10-year U.S. government bond rose from 2.74 percent to 2.78percent. The yield on the 2-year U.S. government bond rose from 2.56 percent to 2.6 percent.”

According to data released by the National Bureau of Statistics, China grew 6.6 percent last year, in line with Beijing's growth target but printing the weakest growth in 28 years. In the last quarter of 2018, China's GDP rose 6.4 percent y/y, down from 6.5 percent seen in Q3.

Meanwhile, the S&P/ASX 200 index traded 0.05 percent lower at 5,845.50 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -27.64 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex