Australian bonds rally after December trade balance turns negative; 10-year yield weakest in 2 weeks

Australian government bonds rallied on Friday following worse-than-expected trade balance data for December, which turned negative, lowering the investors risk sentiments.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 3-1/2 basis points to 2.625 percent, the yield on the long-term 30-year note dipped 2-1/2 basis points to 3.333 percent and the yield on short-term 2-year down 6 basis points to 1.907 percent by 03:40 GMT.

Australia trade balance data came out at AUD628 million deficit, underperforming analyst expectations for an AUD550 million surplus. The previous month's trade balance figures were also revised lower from an AUD105 million surplus to an AUD302 million deficit. The trade balance data reported little change in exports from the month prior, while imports rose roughly 1 percent.

From the United States, Treasuries found downward pressure across the curve on Thursday, pushing to session lows in the wake of stronger the expected ADP employment data for December, increasing 250k in December, up from 190k in November. Despite the lackluster correlation between the ADP estimate and non-farm payrolls, further improvement on this front at least suggest further improvement in employment conditions overall.

Markets now await a greater flow of data to finish off the week on Friday, highlighted by employment situation, trade balance, ISM non-manufacturing and factory orders releases.

Meanwhile, the S&P/ASX 200 index traded 0.22 percent higher at 6,077.5 by 03:40 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 178.17 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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