Australian bonds sharply rebound tracking firm U.S. Treasuries post-FOMC minutes

The Australian bonds sharply rebounded Thursday, tracking firmness in the U.S. counterpart after reading the Federal Open Market Committee (FOMC) meeting minutes, which met market expectations.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, plunged 4-1/2 basis points to 2.44 percent, the yield on 15-year note slumped 5 basis points to 2.85 percent and the yield on short-term 2-year traded nearly 3-1/2 basis points lower at 1.59 percent by 03:20 GMT.

The minutes of the May FOMC meeting were in line with market expectations and the message delivered in the May statement. Namely, it is seen that most FOMC participants viewed any slowing in activity and inflation as driven by transitory factors.

Both Fed staff and FOMC participants held similar views of the incoming data flow as well as the economic outlook. Both saw the labour market as having improved, on balance, even as real GDP slowed in Q1. The weaker March employment figure was viewed as being held down by weather, as warmer temperatures early in the year may have brought hiring forward and adverse weather in other parts of the country constrained hiring.

The minutes state that the committee is likely to "provide additional details about the operational plan to reduce the Federal Reserve’s securities holdings over time. Nearly all policymakers indicated that as long as the economy and the path of the federal funds rate evolved as currently expected, it likely would be appropriate to begin reducing the Federal Reserve’s securities holdings this year," Barclays reported.

Meanwhile, the ASX 200 index traded 0.12 percent down at 5,778.50 by 04:10GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 36.24 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex