Australia 10-year bond yield slumps to 2-week low following Italy’s budget deficit woes

Australian 10-year government bond yield slumped to a 2-week low during Asian session Monday, struck by woes over the Italian budget deficit. Further, Italy also threatened to sue EU officials who are believed to be responsible for a deepening sell-off on Rome’s financial markets.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 5-1/2 basis points to 2.641 percent, the yield on the long-term 30-year bond slumped nearly 6 basis points to 3.127 percent and the yield on short-term 2-year suffered 4 basis points to 1.987 percent by 03:30GMT.

US bond yields fell overnight as risk aversion encouraged safe haven flows into government bonds. The decline in yields was sharper earlier in the session, although some of that was reversed as risk sentiment improved.

The government last week set a deficit target of 2.4 percent of economic output for the next three years. That tripling of its predecessor’s goal by the EU’s second most indebted nation unnerved investors and prompted criticism and calls for a rethink from the European Commission, Reuters reported.

Lastly, anti-Euro comments from Italy weighed on investor sentiment overnight, adding to crowded demand for safe-haven buying. Italian coalition budget committee member Borghi said "I’m truly convinced that Italy would solve most of its problems if it had its own currency".

Meanwhile, the S&P/ASX 200 index traded 0.19 percent higher at 6,138.50 by 03:40 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -72.70 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex