Australian bond yields plunge after RBA cites economic uncertainties in March meeting minutes

Australian government bond yields during Asian trading session Tuesday after the Reserve Bank of Australia (RBA) cited economic uncertainties in its March monetary policy meeting minutes, released early today.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 3-1/2 basis points to 1.945 percent, the yield on the long-term 30-year bond slumped 4 basis points to 2.569 percent and the yield on short-term 2-year traded nearly 3 basis points to 1.563 percent by 04:00GMT.

According to a report from ANZ Research, "The dominant theme of the minutes of the RBA’s Board meeting in March is the tension between the activity and employment data."

More importantly, the Minutes added the comment that:

"It would be appropriate to hold the cash rate steady while new information became available that could help resolve the current tensions in the domestic economic data."

The RBA’s apparent open mindedness on the how the employment/GDP tension is resolved suggests a willingness to act quickly if the unemployment rate starts to move higher. This is not ANZ’s expectation or the Bank’s, for that matter; with the Minutes noting that:

"Leading indicators continued to suggest that employment growth was likely to remain above average, although some indicators had turned down a little recently."

Meanwhile, the S&P/ASX 200 index traded -0.29 percent lower at 6,181.00 by 04:15GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 123.59 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex