Australian bonds slump despite disappointing March employment report; tracks weakness in U.S. Treasuries

Australian government bonds slumped on Thursday despite March employment report disappointed investors, but it follows the weakness in the U.S. Treasuries.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 2-1/2 basis points to 2.771 percent, the yield on the long-term 30-year Note jumped 2-1/2 basis points to 3.344 percent and the yield on short-term 2-year also surged nearly 1/2 basis point to 2.121 percent by 03:00 GMT.

Australia's employment growth dipped to 4.9K in March, lower than the market expectations of 20.3K, up from -6.3K. The unemployment remained steady at 5.5 percent, in line with economists estimate.

In the United States, Treasuries saw downward pressure on Wednesday during a relatively quiet session light on data of great significance, alongside mixed performance seen from equities. This all amounted to the 5-year Note yield finishing at its highest level in 8 years and the 10Yr Note yield converging on the 2.90 percent mark.

With respect to Fed speakers, markets again received a mixed bag of commentary, ranging from those looking for the Fed to continue along its gradual pace of tightening in Dallas Fed President Kaplan and New York Fed President Dudley to those looking for the Fed to little more than it has done already, warning of potential consequences if the Fed moves to raise rates further in St. Louis Fed President Bullard). Markets now look ahead to a greater flow of data on Thursday, highlighted by Philadelphia Fed manufacturing, jobless claims and Conference Board leading economic indicators releases, followed by a 5-year TIPS auction later in the session.

On Tuesday, the minutes of RBA's April 3 board meeting noted that the members agreed that it was more likely that the next move in the cash rate would be up, rather than down. As progress in lowering unemployment and having inflation return to the midpoint of the target was expected to be only gradual, members also agreed that there was not a strong case for a near-term adjustment in monetary policy. Taking into account the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Meanwhile, the S&P/ASX 200 index traded 0.27 percent higher at 5,878.5 by 03:10 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 147.02 (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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