Australian bonds bounce back on safe-haven demand after Trump steps up warnings to N. Korea

The Australian bonds made a solid comeback on the last trading day of the week, tracking highs in the U.S. counterpart, after tensions re-ignited between the US and North Korea, that revamped demand for safe-haven assets. Also, weaker-than-expected U.S. economic data late Thursday added dullness to bond prices.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped to its lowest in more than a month, by nearly 7 basis points to 2.59 percent, the yield on 15-year note plunged 7-1/2 basis points to 2.89 percent and the yield on short-term 2-year traded nearly 5 basis points down at 1.77 percent by 04:10 GMT.

President Trump stepped up his threats against North Korea on Thursday, declaring that he may not have been “tough enough” in his earlier warning to Pyongyang. Those comments sent US stocks lower, with the S&P 500 closing down 1.5 percent and the Vix index, a measure of volatility to 16.17 in Asian trade, its highest since last November, FT reported.

U.S. Treasury long-dated yields dropped to six-week lows on Thursday, pressured by continued tensions between the U.S. and North Korea as well as weak economic data that reduced expectations of an interest rate hike in December. Data released last evening showed that producer prices have slumped to lowest in 11 months amid an unexpected rise in the country’s initial jobless claims, which sent yields lower.

Meanwhile, the S&P/ASX 200 index traded 0.04 percent lower at 5,702.50 by 04:20 GMT, while at 04:0GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -133.68 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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