Australian bond yields plunge on Fed rate cut hopes amid burgeoning economic risks

Australian government bond yields plunged during Asian session Thursday on rising hopes of a Fed rate cut at its monetary policy meeting next week amid increasing risks of an economic slowdown, deepened by the ongoing U.S.-China trade war.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 5 basis points to 1.241 percent, the yield on the long-term 30-year bond suffered 3-1/2 basis points to 1.895 percent and the yield on short-term 2-year slumped 3 basis points to 0.879 percent by 05:40GMT.

According to the latest Reuters poll, over 105 of 111 economists now expect a 25 basis point rate cut at the July 30-31 policy meeting, while only 2 predicted a 50bp cut, with further 2 seeing no change at all.

Wall Street ended mixed overnight, with a rally led by chipmakers and as Facebook beat sales estimates, whereas Caterpillar and Boeing’s earnings disappointed and Tesla slumped on a worse-than-expected loss, OCBC Treasury Research reported.

Further, the UST bond market bull-flattened with the rally led by the longer tenors after the manufacturing PMI saw its lowest print since 2009, which pushed the 10-year UST bond yield down to 2.05 percent. Note former Fed chief Greenspan has endorsed the Fed easing rates for insurance, the report added.

Meanwhile, the S&P/ASX 200 index remained tad 0.43 percent higher at 6,746.50 by 05:50GMT.