Australian bonds slump following weakness in U.S. Treasuries; FOMC decision in focus

Australian government bonds slumped on Monday following weakness in the U.S. Treasuries as investors remained optimistic about December and three more rate hike by the Federal Reserve next year.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 3 basis points to 2.566 percent, the yield on the long-term 30-year note also climbed 3-1/2 basis points to 3.300 percent and the yield on short-term 2-year surged 2 basis points to 1.832 percent by 02:20 GMT.

The U.S. Treasuries yields finish off the week a little lower on Friday following steady growth in November employment report that saw a +228k increase in non-farm payrolls, an unchanged unemployment rate of 4.1 percent and a +0.2 percent m/m increase in average hourly earnings. On balance, this all sets up to reaffirm support for a likely 25 basis points rate hike at the December FOMC meeting.

On the other hand, the market will also look forward to the Thursday’ employment report from the Australian Bureau of Statistics, where employment is expected to grow 19.2K in November, up from October’s 3.7K along with steady unemployment rate at 5.4%.

Meanwhile, the S&P/ASX 200 index traded 0.25 percent lower at 6,003.5 by 02:20 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at -79.05 (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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