Australian bonds jump tracking firmness in U.S. Treasuries post rebound in producer prices

The Australian government bonds jumped on the last trading day of the week, tracking U.S. Treasuries, following a positive rebound in the latter’s producer prices, released yesterday. Further, investors will be looking forward to the release of Reserve Bank of Australia’s (RBA) latest monetary policy meeting minutes, scheduled to be released next week will provide further direction in the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, plunged nearly 3 basis points to 2.64 percent, the yield on 15-year note also slumped 3 basis points to 3.04 percent and the yield on short-term 2-year also traded 2-1/2 basis points lower at 1.66 percent by 03:50 GMT.

Producer prices rebounded in April, rising 0.5 percent m/m, stronger than consensus (0.2 percent) expectations. Excluding food, energy, and trade, PPI inflation rose even more strongly, 0.7 percent m/m. On a y/y basis, headline PPI increased 2.5 percent; excluding food, energy and trade, PPI rose 2.1 percent.

"We expect inflation pressures to remain solid in the economy, as labor markets continue to tighten and the dollar and commodity prices are broadly stable. For the April CPI report published tomorrow, we expect core CPI to rise 0.2 percent m/m and 2.0 percent y/y and headline CPI to rise 0.2 percent m/m and 2.2 percent y/y," Barclays Research commented in its latest research report.

Meanwhile, the ASX 200 index traded 0.78 percent down at 5,809.50 by 04:30GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 74.06 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex