Australian 10-year bond yield dips to over 1-week low on expectations of weak inflation data

Australian government bonds gained during Asian session Tuesday as investors moved towards safe-haven buying on expectations of weaker Q1 inflation data. Australia’s CPI tomorrow would highlight the chances of any moves from the Reserve Bank of Australia in the near-term.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, dipped 4-1/2 basis points to 1.895 percent (lowest since April 12), the yield on the long-term 30-year bond fell nearly 5 basis points to 2.514 percent and the yield on short-term 2-year traded 3-1/2 basis points lower at 1.475 percent by 04:00GMT.

On the other hand, a U.S. announcement to end exemptions on purchases of Iranian oil or face sanctions saw oil prices jump. Otherwise it was a fairly subdued session in shares, bonds and currencies.

The yields on U.S. Treasuries lifted marginally. US 10-year yields rose 3 basis points to 2.58 percent. The U.S. 2-year yields were little changed at 2.38 percent.

Looking ahead, markets will focus Australia’s Q1 CPI data scheduled to be released on Wednesday at 01:30 GMT. It is forecast to rise 0.2 percent q/q and 1.5 y/y, down from 0.5 percent and 1.8 percent, respectively.

Lower inflation reading would pressurise the RBA to bring forward the interest rate cut.

“All eyes will be on the CPI print tomorrow for any chance to break the multi-month stasis,” ANZ Bank noted.

Meanwhile, the S&P/ASX 200 index traded 0.29 percent higher at 6,287.50 by 04:10GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -129.76 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex