Australian bonds decline tracking weakness in U.S. Treasuries, upbeat Q1 CPI

The Australian government bonds declined Wednesday, tracking weakness in the U.S. counterparts and after reading the upbeat consumer price inflation (CPI) for the first quarter of this year. Although q/q CPI stood pat, the annual rate helped sway investors away from safe-haven assets.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2-1/2 basis points to 2.64 percent, the yield on 15-year note climbed nearly 2 basis points to 3.04 percent and the yield on short-term 2-year traded 1 basis point higher at 1.70 percent by 04:30 GMT.

Australia’s headline inflation rose 0.5 percent quarter-on-quarter in the first three months of 2017, according to the Australian Bureau of Statistics, matching the December quarter figure and a tad below expectations for a 0.6 percent gain. However, it rose to 2.1 percent, up from 1.5 percent in the December quarter and versus forecasts for a 2.2 percent rise, lifting the headline inflation up into the Reserve Bank of Australia’s (RBA) 2-3 percent target range for the first time since the September quarter of 2014.

However, tradable inflation remains weak, falling by 0.2 percent q/q in Q1, while non-tradable prices rose by 0.9 percent. Weak wage growth continues to impact, with market services inflation flat in Q1, and up just 0.7 percent y/y.

Meanwhile, the ASX 200 index traded 0.08 percent up at 5,907.50 by 05:00GMT, and the FxWirePro's Hourly AUD Strength Index remained neutral at -2.69 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex