Australian bonds slump as trade balance returns to surplus in January

Australian government bonds slumped on Thursday following better-than-expected trade balance data from the month of January, which return to surplus after registering huge deficit in December last year.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.817 percent, the yield on the long-term 30-year note climbed 1 basis point to 3.395 percent and the yield on short-term 2-year up 1 basis point to 2.011 percent by 03:00 GMT.

Australia’s trade surplus came in at AUD1.055 billion in January, up from AUD1.358 billion deficit the month prior, according to the Australian Bureau of Statistics. The January surplus was more than triple the AUD330 million forecasts by a Reuters’ survey and was driven by a 4 percent m/m increase in exports and a 2 percent drop in imports. 

In the United States, Treasuries saw overnight gains unwind, eventually leading to little overall change for the session as markets absorbed ongoing trade developments following the recent announcement of planned steel and aluminum tariffs (expected to be officially announced Thursday or Friday). This issue has already caused a significant stir in financial markets, amplifying equity market volatility, and has claimed yet another resignation from the Trump administration (this time by NEC Director Cohn).

On Wednesday, Australia’s gross domestic product (GDP) grew 0.4 percent quarter on quarter in the three months through the end of December, slowing from 0.7 percent growth in the previous quarter, according to the Australian Bureau of Statistics. That was below a median of economists’ estimates compiled by Reuters forecasting 0.6 percent growth. In year-on-year terms, GDP grew 2.4 percent in the fourth quarter, short of the 2.5 percent growth forecast and at a slower rate than the 2.8 percent pace recorded in the previous quarter.

Meanwhile, the S&P/ASX 200 index traded 0.19 percent higher at 5,929.5 by 03:05 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at 103.06 (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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