Australian bonds gain on weak risk appetite

The Australian government bonds gained on Wednesday as risk sentiment softens among investors after Kuwait workers ended 3-day strike that had reduced crude output from OPEC countries, pushing oil prices to new session low. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved down 0.74 pct to 2.544 pct and the yield on the 3-year bond dipped 0.15 pct to 1.991 pct by 0500 GMT.

Kuwaiti oil and gas labourers finished a 3-day strike that had briefly cut the OPEC crude output to half, which drag oil prices down. On Sunday, the negotiations between Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement in the Doha round of talks to strike a deal on oil output freeze. The International benchmark for crude oil prices, Brent futures fell 2.45 pct to $42.95, while West Texas Intermediate crude oil tumbled 2.70 pct to $39.97 by 0525 GMT.

"In the near term we are going to see more downward pressure than upward," said IHS analyst Victor Shum to Reuters.

The Reserve Bank of Australia Governor Stevens said that there is no sign of financial shock that would weigh further on global growth and monetary policy globally facing diminishing returns, respective governments need to do more. Failure to lift economic growth biggest threat to global financial system, he added.

Yesterday, the Reserve Bank of Australia in its April monetary policy meeting hinted that they will continue to hold official cash rate and low inflation would provide scope to ease policy if necessary, there is a reasonable prospect for continued moderate economic growth, they added. Said it is also appropriate for the monetary policy to be very accommodative given consistent low inflation, higher AUD and appreciating AUD could complicate economic rebalancing, keep inflation low. Further, board noted service sector exports sensitive to AUD, discussed impact of AUD more broadly. Said rise in AUD is due to higher commodity prices and on rising expectations of slower Fed hikes. Said low interest rates had played important role in boosting consumption, housing market and the country is awaiting new information on inflation, whether jobs strength would be maintained. Further, members noted that labour market is noticeably stronger than year earlier. Slowdown in employment growth in early 2016 was to be expected and recent data remains consistent with further moderate growth in economy in Q1.

Meanwhile, the S&P/ASX 200 index fell 0.34 pct or 17.5 points to 5,192.5 by 0522 GMT.