Australian 10-year bond yield dips to new low as market sentiments dampened by ongoing global growth worries

Australian government bonds rallied during Asian trading session Thursday as investors moved towards safe-haven buying as markets risk sentiments dampened due to ongoing global growth worries.

Also, fear that the partly inverted U.S. yield curve would bring the much-anticipated recession closer boosted the demand for risk free assets.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell to a low of 1.722 percent, floating 4-1/2 basis points lower at 1.731 percent, the yield on the long-term 30-year bond also plunged 4-1/2 basis points to 2.380 percent and the yield on short-term 2-year too traded 1/2 basis point lower at 1.458 percent by 04:00GMT.

“Financial market sentiment was dampened by ongoing global growth worries. These were further fuelled by dovish comments from the European Central Bank (ECB) and the signal from the inverted yield curve. Share markets and bond yields fell. Global growth concerns also weighed on the Australian dollar,” noted St.George Bank.

“Further dovish signs from the ECB saw the recent drop in global bond yields extend further. The U.S. 10-year yield dropped another 6 basis points to 2.37 percent, the lowest since late 2017. The U.S. 2-year yields also fell 7 basis points to 2.20 percent.”

Comments from European Central Bank (ECB) president Draghi suggested that the ECB could delay an interest rate hike stating that “we would ensure that monetary policy continues to accompany the economy by adjusting our rate forward guidance to reflect the new inflation outlook”. Draghi also added that the ECB were looking at ways to mitigate some of the negative consequences of negative interest rates which is being blamed for hurting bank lending.

There was no significant economic data released locally today.

“Asian markets may trade with a consolidative tone again today, with bonds better bid ahead of the month-end. Mnuchin and Lighthizer are due in Beijing for trade talks," noted OCBC Bank.

"For today’s economic data calendar, watch for US’ pending home sales and initial jobless claims, German CPI, and Eurozone’s consumer confidence. Speakers include Fed’s Quarles, Calrida, Bowman and Bostic, and ECB’s Guindos and Nowotny."

Meanwhile, the S&P/ASX 200 index traded 0.60 percent higher at 6,151.50 by 04:10GMT.