Australian bonds slide tracking U.S. Treasuries ahead of RBA’s monetary policy statement

Australian bonds slid during early Asian session Thursday tracking similar movement in U.S. Treasuries as investors are awaiting the Reserve Bank of Australia’s (RBA) monetary policy statement, scheduled to be released today by 00:30GMT.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped nearly 2 basis points to 2.85 percent, the yield on the long-term 30-year note surged 3 basis points to 3.49 percent and the yield on short-term 2-year rose nearly 1 basis point to 2.01 percent 03:15GMT.

Markets can have a brutal way of showing their efficiency, even if at times it comes later than it should. While the post facto synopsis suggests that the volatility this week derived from structured products, the higher yields from better US wages data have created a degree of uncertainty. Nevertheless, a remark made by the RBA Governor Philip Lowe bears remembering: “Investment strategies that looked sensible when interest rates were very low tend not to look so good when interest rates are higher”.

Inflationary pressures in Australia have stabilised just below the RBA’s policy band and are expected to gradually improve, reaching the lower end of the target band in late 2019 or early 2019. The retail environment remains positive for consumers, as Q4 retail sales volumes increased 0.9 percent q/q. The sustainability of this and the uptick in consumer sentiment will both rely on an improvement in wage growth from the current lows.

Meanwhile, the S&P/ASX 200 index traded 0.10 percent lower at 5,806.5 by 03:20 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -30.19 (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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