Australian bonds slump after RBA leaves benchmark interest rate on hold, expects growth to average above 3 pct in 2018

Australian government bonds slumped Tuesday after the Reserve Bank of Australia (RBA) remained on hold in its monetary policy meeting held early today, keeping the benchmark interest rate at 1.50 percent, citing sustainable economic growth and expectations of reaching the 3 percent GDP target, on an average this year.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, jumped 2 basis points to 2.75 percent, the yield on the long-term 30-year Note remained tad higher at 3.23 percent and the yield on short-term 2-year remained flat at 2.05 percent by 04:30 GMT.

The global economy has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth, according to the statement released by RBA Governor Philip Lowe. The recent data on the Australian economy have been consistent with the Bank's central forecast for GDP growth to pick up, to average a bit above 3 per cent in 2018 and 2019. 

Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.

Meanwhile, the S&P/ASX 200 index traded 0.04 percent higher at 6,004.50 by 04:40 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 128.13 (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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