Australian bonds plunge post Macron’s win in French election as riskier assets take lead

The Australian government bonds plunged on the first trading day of the week as investors moved away from safe-haven assets, following the expected victory of Emmanuel Macron in the French election held over the weekend. Tracking this, riskier instruments took the lead, with oil and equities trending higher.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 3 basis points to 2.69 percent, the yield on the 15-year note climbed 2-1/2 basis points to 3.10 percent and the yield on short-term 2-year traded nearly 2 basis points higher at 1.74 percent by 04:30 GMT.

The euro edged higher 0.1 percent to a 6-month high immediately post it was confirmed that Macron had taken a wide margin over his contender Marine Le Pen. The currency later slipped back 0.3 percent to USD1.0968. The dollar index, which measures the greenback against a basket of global peers, was up 0.1 percent at 98.764.

Macron’s victory offered significant relief to the European Union, which Le Pen threatened to leave. His platform to loosen labour rules, make France more competitive globally, and deepen ties with the European Union was also likely to reassure global financial markets jittery at the prospect of a Le Pen victory. According to the latest 98 percent votes counted, the former secured a significant 66 percent of the votes over the latter’s 34 percent.

Lastly, Australia’s business conditions improved further in April to be at the highest level since January of 2008. Business confidence also improved, jumping to the highest level in seven years. Both indices are well above their long-run averages, consistent with our view that the underlying momentum in activity remains solid.

Meanwhile, the ASX 200 index traded 0.31 percent down at 5,852.00 by 05:10GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -66.77(a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex