Australian bonds nearly flat after RBA cuts cash rate by 25bp; focus remains on August trade balance, retail sales

The Australian government bonds remained nearly flat during Asian session of the second trading day of the week Tuesday after the Reserve Bank of Australia (RBA) slashed its benchmark cash rate by 25 basis points to 0.75 percent at its latest monetary policy meeting, held early today, while investors still eye the country’s trade balance and retail sales data for the month of August, scheduled for release by end of this week for further direction in the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, hovered around 0.979 percent, the yield on the long-term 30-year bond also traded flat at 1.592 percent and the yield on short-term 2-year remained tad higher at 0.699 percent by 06:25GMT.

While the outlook for the global economy remains reasonable, the risks are tilted to the downside. The US–China trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans because of the increased uncertainty, the policy statement noted.

It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time, the Board added in the statement.

Global risk appetite was likely caught between optimism over the stronger-than-expected official manufacturing and Caixin PMIs which rose to 49.8 and 51.4 respectively, versus news of US President Donald Trump’s personal attorney Rudy Giuliani being subpoenaed for documents, OCBC Treasury Research reported.

Further, Trump told reporters that “we’re trying to find out about a whistleblower” even as Secretary of State Michael Pompeo and Attorney General William Barr are being drawn deeper into the House impeachment inquiry, the report added.

Meanwhile, the S&P/ASX 200 index remained tad 0.58 percent higher at 6,727.50 by 06:35GMT.