• Australian 10-year bond yield dips to 1-week low ahead of RBA governor lowe’s speech

    Source: FxWire Pro - Commentary / 22 May 2018 00:59:04   America/New_York

    Australian government bonds rallied on Tuesday as investors do not expect any hint on interest rate hike from the Reserve Bank of Australia (RBA) Governor Philip Lowe in his May 23 speech. Following dovish sentiment, the 10-year bond yield hits lowest in 1-week.

    The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 2-1/2 basis points to 2.868 percent, the yield on the long-term 30-year Note dipped 3 basis points to 3.355 percent and the yield on short-term 2-year down 1/2 basis point to 2.037 percent by 04:30 GMT.

    In the United States, Treasuries saw downward pressure in the short-end, contrasted by little change further out the curve, during a relatively quiet Monday session light on economic data of great significance. The day's narrative for the US focused on easing trade tensions between the US and China, providing a solid boost to equities.

    With respect to data, markets were largely limited to Chicago Fed National Activity Index, posting solid further gains in April, awaiting more significant releases later in the week (particularly FOMC minutes on Wednesday and durable goods orders on Friday).

    With respect to speakers, markets received commentary from Atlanta Fed President Bostic and Philadelphia Fed President Harker with both appearing to stand in support of further tightening over the course of 2018 (though clearly some underlying debate is emerging with respect to how far the Fed should go, something that will likely be heard throughout 2019).

    Markets now look ahead to another light flow of data on Tuesday, largely limited to Richmond Fed manufacturing data and a 2-year Note auction later in the session.

    In addition, heaving sell-off in the Australian bonds observed last week was due strong employment report released on Thursday, in which, employment conditions across Australia reached a record high last month in National Australia Bank’s (NAB’s) monthly business survey, amid overall above-average confidence among firms. According to the bank’s April figures, the employment index at +13 was, on a trend basis, at its highest level since the polling began in March 1997. NAB said this is consistent with a robust rate of jobs growth, of around 24K per month based on historical patterns. Australia added 22.6K jobs in April, reversing March’s fall of -0.7K. But the unemployment rate rose to 5.6% last month, up from 5.5% seen in March.

    Meanwhile, the S&P/ASX 200 index traded 0.67 percent lower at 6,039.5 by 04:40 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at 84.43 (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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