Australian bonds gain slightly after UK lawmakers pull out of Brexit deal plan

Australian government bonds slightly gained across the curve during Asian trading session Wednesday after the United Kingdom’s lawmakers pulled out of a Brexit deal plan in a voting concluded late yesterday.

However, Wall Street as well as the currency market actually welcomed the deal rejection with a smile, showing green signals all over, which capped further gains in debt prices.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1 basis point to  2.276 percent, the yield on the long-term 30-year bond slipped 1/2 basis point to 2.827 percent and the yield on short-term 2-year traded tad lower at 1.871 percent by 03:40GMT.

The UK parliament’s resounding rejection of PM May’s Brexit deal in a 432-202 vote (unprecedented loss) has prompted a confidence vote on the latter on Wednesday.

The no-confidence motion is due to be debated in Parliament tomorrow; It is unlikely to succeed, as rebel Tory MPs will fall in behind Prime Minister May and the DUP has indicated it will support the government. An extension to the 29 March deadline looks inevitable, ANZ Research reported.

Lastly, Australia’s Q4 2018 CPI is expected to witness a fall in petrol prices and "ongoing retail price deflation to weigh on headline CPI, which is forecast to slow to 1.6 percent y/y. Core inflation is expected to improve to 0.5 percent q/q, leaving the annual growth steady at 1.8 percent, in line with the RBA’s forecasts. Risks on these forecasts are skewed to the downside," the report added.

Meanwhile, the S&P/ASX 200 index traded 0.06 percent higher at 5,762.50 by 03:45GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 120.38 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex