Australian bond yields continue to track fall in U.S. peer marking Fed Chair Powell’s dovish comments last week

Australian government bond yields continued to track fall in the United States counterpart after Federal Reserve Chair Jerome Powell released a series of dovish comments during last week, pointing towards a slower rate of policy tightening this year.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 3-1/2 basis points to  2.274 percent, the yield on the long-term 30-year bond slumped nearly 3 basis points to 2.812 percent and the yield on short-term 2-year traded 3 basis points lower at 1.867 percent by 03:20GMT.

The expectation that the Fed is now on hold for the foreseeable future is firmly entrenched in markets. The next rate decision is on January 30, and the FOMC will enter blackout on 18 January. It is difficult to see current guidance changing between now and then, especially as the December CPI confirmed that the Fed can well afford to wait on raising interest rates. Data dependency is the name of the game at present and the busy data calendar this week has the potential to create volatility, ANZ Research reported.

Further, this week begins with the US government shutdown now at is longest ever as it hits 24 days today. It seems uncertain at this point when it will come to an end as both sides don’t show any signs of backing down with Trump continuing to insist for border wall funding, OCBC Treasury Research reported.

Meanwhile, the S&P/ASX 200 index traded 0.42 percent lower at 5,702.50 by 03:25GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -22.35 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex