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Australian bonds trade mixed ahead of FOMC's policy decision; no surprise in March RBA meeting minutes

Australian government bonds traded mixed on Tuesday as investors await the Federal Reserve monetary policy decision, where it is widely expected to hike interest rate by 25 basis points to 1.50-1.75 percent. Also, the no surprise election was found in the Reserve Bank of Australia’s March meeting minutes released today.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis points to 2.700 percent, the yield on the long-term 30-year note traded flat at 3.290 percent and the yield on short-term 2-year climbed 2 basis points to 1.999 percent by 02:30 GMT.

The Reserve Bank of Australia in its March meeting minutes reiterate that rising Australian dollar would slow economy pick up, inflation and low rates playing a part in lowering unemployment, lifting inflation. The central bank repeats further progress on policy goals likely to be only gradual and GDP growth expected to exceed potential growth in 2018, CPI inflation expected to rise to a little above 2 percent this year.

In the United States, Treasuries pushed higher across the curve to open the week on Monday, alongside considerable downward pressure seen from equities which were undermined by a number of factors. Markets now look ahead to what stands to be another relatively light session in terms of data on Tuesday (compounded by a dearth of Fed commentary due to the FOMC media blackout period).

Given the backdrop concerns related to fears of a budding trade war, markets will pay even closer attention to the updated economic projections that will accompany the Fed statement on Wednesday. On balance, we anticipate the Fed will deliver the much anticipated 25bps rate hike, suggesting support for additional moves as the year progresses.

However, we also expect some lingering backdrop concerns related to both the impact of fiscal stimulus (namely the recently passed tax cut) but also the potential for geopolitical disruptions to impact broader sentiment and economic conditions. In addition to Wednesday'sstatement release, markets receive the current account, existing home sales, Markit US manufacturing/services PMI, durable goods orders and new home sales releases throughout the week, coupled with a 10Yr TIPS auction (reopening) on Thursday.

Meanwhile, the S&P/ASX 200 index traded 0.22 percent lower at 5,912.5 by 02:30 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -121.32 (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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