Australian bonds slump tracking weakness in U.S. Treasuries; 10-year yield jumps about 5bps

Australian government bond slumped during Asian trading session Friday tracking a similar movement in the United States’ counterpart as stronger-than-expected U.S. Q4 GDP growth boosted investors risk taking appetite.

Although real GDP growth slowed in the fourth quarter, the stronger-than-expected outturn should alleviate some concerns that the economy is in serious trouble. The U.S. GDP rose by an annualised 2.6 percent in Q4 versus consensus expectations of a 2.2 percent increase and following an increase of 3.4 percent in Q3.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 4-1/5 basis points to 2.15 percent, the yield on the long-term 30-year bond jumped 3 basis points to trade at 2.71 percent and the yield on short-term 2-year climbed 2-1/2 basis points to 1.74 percent by 03:30GMT.

“The U.S. bond yields rose, particularly at the long end, following the release of stronger than expected U.S. GDP data. The yield on the 10-year US government bond rose 4 basis points to 2.72 percent. The yield on the 2-year U.S. government bond rose 2 basis point to 2.52 percent,” noted St.George Bank.

However, global risk appetite was affected by U.S. president Trump’s walking out of the second summit with North Korean leader Kim Jong Un amid a lack of consensus over sanctions.

Markets now await Australia Q4 GDP data release, which is scheduled for Wednesday, March 6. Economists forecast it come at 0.4 percent q/q and 2.6 percent y/y.

“A big week lies ahead, with lots of focus on the Q4 GDP report. We are expecting a soft result of 0.2 percent q/q, with our detailed preview below. This is disappointing and could force the RBA to downgrade its outlook again in the May report. We will review our outlook for 2019 and 2020 following the publication of the GDP data,” noted ANZ.

“We will also certainly be revising 2019 GDP lower, with implications for our call on the RBA. We will finalise our Q4 GDP print once we see the rest of the partials on Monday and Tuesday.”

Meanwhile, the S&P/ASX 200 index traded 0.48 percent higher at 6,183.50 by 03:40GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -163.25 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex