Australian bonds slump on profit booking; 10-year yield jumps 4bps

Australian government bonds slumped across the curve during early Asian session Friday as investors cashed in profits by closing their short positions ahead of the holidays.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 4 basis points to 2.224 percent, the yield on the long-term 30-year bond also jumped 4 basis points to 2.733 percent and the yield on short-term 2-year up 2-1/2 basis points to 1.843 percent by 03:50GMT.

“With S&P500 down another 2.48 percent overnight amid the continued fallout from weaker Apple guidance while the 10-year UST bond yield rallied further to 2.55 percent (lowest since January 2018) after US manufacturing ISM disappointed by retreating further from 59.3 to 54.1 (low since November 2016),” noted OCBC Bank.

“Note the futures market has now flipped to pricing in a possibility of a Fed rate cut in 2019. Oil prices, however, continued to tread higher on lower supply expectations.”

Moreover, the Asian markets are likely to see further consolidation to end the week on a soft tone while awaiting tonight’s key US nonfarm payrolls (NFP) and unemployment data (market consensus forecast: 184k and 3.7 percent respectively versus November readings of 155k and 3.7 percent), the OCBC Bank added.

The economic data calendar is relatively busy today and kicks off with more services and composite PMI data across US, Europe and Asia including China’s Caixin, Malaysia’s trade, Thai consumer confidence, German unemployment and Eurozone’s CPI. Fed’s Bostic and Barkin are speaking, while Fed chair Powell, as well as Bernanke and Yellen, are being interviewed at the AEA. 

Meanwhile, the S&P/ASX 200 index traded 0.24 percent lower at 5,529.5 by 03:50GMT.