Australian long-term bonds continue downtrend on cues from upbeat retail sales data, buoyant Chinese exports

Australian government bonds slumped on Wednesday following board weakness in the U.S. Treasuries. Yields on the benchmark 10-year US Treasury hit a nine-month high overnight, climbing to 2.5 percent after the Bank of Japan’s trimmed its purchases of super-long debt.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2 basis points to 2.73 percent, the yield on the long-term 30-year note rose nearly 1 basis point to 3.43 percent while the yield on short-term 2-year slumped 2 basis points to 2.04 percent by 04:40 GMT.

Australia’s retail sales for the month of November recorded its strongest monthly rise since a similar gain in February 2013, underpinned by the release of the iPhone X and increasing popularity of Black Friday and associated sales. However, the figures have largely shrugged-off the jump in petrol prices for the month, which was thought to dampen the sales relative to the consensus expectation.

Retail sales were up 1.2 percent m/m in November, building on the 0.5 percent m/m gain for October, and seeing annual growth at 2.9 percent y/y, the best result since July 2017. Categories impacted by these are household goods (up 4.5 percent m/m, with the electrical and electronic sub-category up 9.3 percent m/m) and other retailing (+2.2 percent m/m). 

Data on Friday showed Chinese exports stayed buoyant in December, though imports missed forecasts after a very strong November. The next major event is the release of U.S. consumer prices and retail sales later on Friday, where a soft outcome could drag the U.S. dollar down to the benefit of the Aussie and the kiwi.

Lastly, Australia is the world's largest exporter of iron ore and a major supplier of coal, copper, gold and liquefied natural gas. Commodities have been underpinned by surprisingly resilient demand from China, partly as Beijing's efforts to curb pollution lead to more imports of high-quality iron ore and coal for Australia.

Meanwhile, the S&P/ASX 200 index traded 0.10 percent lower at 6,023.5 by 04:40 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 73.23 (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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