Australian bonds gain on hopes of fewer Fed rate hikes; November retail sales in focus

Australian government bonds gained during Asian session Thursday, tracking a similar movement in the U.S. Treasuries on hopes of fewer interest rate hikes by the Federal Reserve. Investors will now also keep an eye on the country’s November retail sales data, due on January 11 for further direction in the debt market.  

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 2.305 percent, the yield on the long-term 30-year bond fell 1-1/2 basis points to 2.825 percent and the yield on short-term 2-year traded nearly 1 basis point lower at 1.895 percent by 04:00GMT.

According to a report from CNBC, "Fed members conceded in their December meeting that the central bank's policy path is "less clear" after approving the fourth and final interest rate hike in 2018. The central bank's latest meeting minutes showed some members hesitant about the December hike given a lack of more robust inflationary pressure".

Global risk appetite sustained overnight as reflected in the rally in Wall Street and crude oil prices. Notably, FOMC minutes reinforced Fed chair Powell’s cautious and patient message, with members judging “a relatively limited amount of additional tightening likely would be appropriate”, whilst a few of the seven non-voting members had opposed the fourth rate hike in December 2018, OCBC Treasury Research reported.

Meanwhile, the S&P/ASX 200 index traded 0.42 percent lower at 5,715.50 by 04:10GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 161.03 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex