Australian 10-year bond yield hovers near record low after Fed cuts first time in a decade

Australian 10-year government bond yield hovered near record-low during Thursday’s Asian session after the Federal Reserve cut its benchmark interest rate by 25 basis points for the first time in a decade, also signalling for further rate cuts in the coming months.

Investors will now look forward to the release of Australia’s retail sales data for the month of June, scheduled to be released tomorrow, for further direction in the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped nearly 1 basis point to 1.198 percent, the yield on the long-term 30-year bond hovered around 1.862 percent and the yield on short-term 2-year also remained nearly steady at 0.865 percent by 05:10GMT.

Fed chair Powell called the Fed’s first 25bp rate cut in a decade as a “mid-term policy correction” intended to “insure against downside risks from weak global growth and trade uncertainties”, OCBC Treasury Research reported.

However, there were two dissenters, namely Rosengren and George, who coupled with the fact that Powell’s positioning this first cut as not opening the door for more cuts to follow, prompted profit-taking on Wall Street and a choppy session for UST bonds (10-year yield closed at 2.01 percent), the report added.

"Asian markets are likely to see some profit-taking interest today given a trimming of market expectations for further Fed rate cuts," OCBC further commented in the report.

Meanwhile, the S&P/ASX 200 index remained tad -0.10 percent down at 6,726.50 by 05:15GMT.