Australian 10-year bond yield hits 1-week high on strong retail sales data; buoyed by sell-off in U.S. Treasuries

Australian government bonds slumped across the curve on Monday following better-than-expected April retail sales data, pushing the 10-year yield to 1-week high. Also, heavy sell-off in the U.S. Treasuries pressurized the world’s 11th largest economy’s debt market.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 4-1/2 basis points to 2.731 percent, the yield on the long-term 30-year Note jumped 2 basis points to 3.240 percent and the yield on short-term 2-year up 5-1/2 basis points to 2.054 percent by 03:00GMT.

According to the Australian Bureau of Statistics (ABS), sales rose by 0.4 percent to $26.56 billion in seasonally adjusted terms, topping forecasts for an increase of 0.3 percent. The result was an improvement on March when retail sales were flat.

In the United States, Treasuries found downward pressure to finish off the week, amidst a much calmer Friday session as markets absorbed the better than expected May employment report and further digested news of political stability returning to Italy. With respect to data, markets were clearly receptive to the 223K increase in non-farm payrolls, alongside a decrease in the headline unemployment rate to 3.8 percent, lowest since April 2000.

With respect to inflation, hawks were once again handed more ammunition with average hourly earnings increasing +0.3 percent, pointing to resumed wage pressures currently making their way through the labour market. Markets now look ahead to a lighter flow of data in the week ahead, largely highlighted by April trade balance data on Thursday.

Meanwhile, the S&P/ASX 200 index traded 0.07 percent higher at 6,033.5 by 03:15 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 12.62 (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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