Australian bond yields track weakness in U.S. peer after Fed signalled further rate cuts ahead

Australian government bond yields continued to track losses in the United States counterpart after the Federal Reserve on Wednesday in its monetary policy meeting, signalled further rate cuts on the way despite keeping on hold.

The United States’ benchmark 10-year Treasury note yields, since then, has been hovering around lows since September 2016, dragging along other global yields as well.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, fell 1 basis point to 1.278 percent, the yield on the long-term 30-year bond suffered 1-1/2 basis points to 1.897 percent and the yield on short-term 2-year slumped nearly 2-1/2 basis points to 0.912 percent by 05:30GMT.

With the Fed essentially opening the door wide to potential rate cuts later this year, the S&P initially surged to a record high, but retraced after president Trump warned of possible retaliation for Iran’s shooting down of an US navy drone that he called a “very big mistake” and caused oil prices to pop higher, OCBC Treasury Research reported.

The 10-year UST bond yield resurfaced above 2% as gains were subsequently surrendered, while the USD headed towards its largest two-day slide in 16 months on the prospect of a more dovish Fed, the report added.

Meanwhile, the S&P/ASX 200 index remained 0.63 percent lower at 6,573.50 by 05:35GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 5.18 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex