Australian bonds gain ahead of October employment report; U.S.-China trade doubts continue

The Australian government bonds gained during Asian session of the first trading day of the week Monday ahead of the country’s employment report for the month of October, scheduled to be released later this week amid ongoing U.S.-China trade uncertainties after President Donald Trump casted doubts over potential rollback of existing tariffs as part of the Phase 1 trade deal.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1/2 basis point to 1.291 percent, the yield on the long-term 30-year bond hovered around 1.893 percent and the yield on short-term 2-year suffered 2 basis points to 0.874 percent by 04:50GMT.

For this week, markets will remain stuck to parsing the Sino-US trade headlines for short term directional cues. A large degree of positives may have already been priced in at current levels, and the market’s base case has also shifted from holding existing tariffs to a roll-back. Therefore, the bar for positive surprises on the Sino-US trade front may be getting higher and higher, OCBC Treasury Research reported.

In that context, note that the AUD remains trapped in its downtrend channel despite all the Sino-US progress. It may instead turn heavy from here if positive surprises become harder to come by, the report added.

"The implicit heaviness on the broad USD from Sino-US progress may also ease, as the market turns its attention to the firmer UST yields and yield differential support. We prefer to reflect our USD-positive stance by staying negative on the EUR and GBP for now," OCBC further commented in the report.

Meanwhile, the S&P/ASX 200 index edged tad 0.28 percent higher at 6,750.50 by 04:55GMT.