Australian bonds rally amid muted trading session tracing Fed’s 25bp rate cut

The Australian government bonds rallied during Asian session of the last trading day of the week Friday amid a muted session that witnessed data of little economic significance. However, the Federal Reserve’s 25bp rate cut on Wednesday added to decline in yields, which investors are wary of neglecting in the wake of ongoing global geopolitical tensions.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 3 basis points to 1.058 percent, the yield on the long-term 30-year bond suffered nearly 2 basis points to 1.636 percent and the yield on short-term 2-year suffered nearly 1-1/2 basis points to 0.779 percent by 03:50GMT.

US money market interest rates normalised and financial markets performed well across the board overnight. Economic data provided few surprises. US 10-year yields were a touch higher at 1.79 percent, ANZ Research.

This week’s events have likely pushed the RBA closer to cutting rates at the October Board meeting. The unemployment rate edged up to 5.3 percent in August. While this was accompanied by a solid rise in employment, the reality is there is too much spare capacity in the labour market and this is weighing on wage growth and, ultimately, preventing the RBA from achieving its inflation mandate, ANZ Research reported in a separate report.

Meanwhile, the S&P/ASX 200 index edged tad 0.30 percent up to 6,743.50 by 03:55GMT.