Australian bonds surge tracking U.S. Treasuries ahead of February employment report, Fed policy meeting

Australian government bonds surged during Asian trading session Wednesday tracking a similar movement in the United States’ Treasuries ahead of the country’s employment report for the month of February, scheduled to be released on March 21 by 00:30GMT, besides, the Federal Reserve’s monetary policy meeting, due for later in the day, for further direction in the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 2 basis points to 1.930 percent, the yield on the long-term 30-year bond traded tad lower at 2.573 percent and the yield on short-term 2-year plunged 3-1/2 basis points to 1.531 percent by 04:30GMT.

"The FOMC is primed to keep its policy settings steady, but shade down its median dots plot (with the hawks essentially in retreat) from two to one hike this year and may no hikes in 2020 (given that market is already pricing in the possibility of a rate cut next year), and potentially clarify thinking on the termination of its balance sheet unwinding process. Any surprises on the Fed’s part, namely unexpectedly hawkish signals (eg. SEP indicating one hike in 2019 and one hike in 2020) or unexpectedly dovish signals (eg. SEP indicating no hikes this year or next) may engender some market volatility," OCBC Treasury reported.

Financial markets lack clear direction ahead of tomorrow’s FOMC announcement, where the committee is expected to cut its median dot points and provide guidance on ending balance sheet normalisation. Position adjustment ahead of the announcement probably best describes the price action. US data releases continued to point to ongoing weak investment to start 2019, which plays into the cautious guidance that the Fed has been giving, ANZ Research reported.

Meanwhile, the S&P/ASX 200 index traded -0.38 percent lower at 6,161.50 by 04:40GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -59.76 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex