Australian bonds slump tracking U.S. Treasuries after Q2 GDP cheers markets more than expected

The Australian bonds sharply rallied Thursday, tracking weak performance in the U.S. Treasuries after the country’s second-quarter gross domestic product (GDP) cheered markets, adding to hopes of an interest rate hike in December although inflation remains below consensus.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 7 basis points to 2.74 percent, the yield on 15-year note also surged 7 basis points to 3.03 percent and the yield on short-term 2-year also traded 3 basis points higher at 1.90 percent by 02:40 GMT.

The United States’ real GDP increased by an annualized 3.0 percent in the second quarter of 2017 according to the second BEA estimate, against previously reported 2.6 percent gain. This was well above the consensus expectation for a 2.7 percent uptick.

The bulk of the upward revision was related to stronger consumer spending, which grew by 3.3 percent, from previous 2.8 percent. Growth was led by durable spending which rose 8.9 percent, from 6.3 percent in the prior reading, but the remaining spending categories also performed better than previously reported.

Meanwhile, the S&P/ASX 200 index traded 0.50 percent higher at 5,681.50 by 03:10 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 53.62 (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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