Australian bonds edge higher on fear of rising trade tensions between U.S.-China; March employment in focus

Australian government bonds gained on Wednesday as investors moved into safe-haven buying following rising trade tensions between two world’s biggest economies. Also, markets await March employment report for future direction in debt market.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 2 basis points to 2.744 percent, the yield on the long-term 30-year Note dipped 2-1/2 basis points to 3.327 percent and the yield on short-term 2-year also slumped nearly 2 basis points to 2.112 percent by 03:00 GMT.

In the United States, Treasuries continued to see tighter trading on Tuesday during a relatively quiet session, highlighted by stronger than expected housing starts/building permits and industrial production/capacity utilization releases. With respect to Fed speakers, continued support for further policy tightening was seen from San Francisco Fed President Williams and Chicago Fed President Evans.

However, uncertainties stemming from escalating trade tensions continue to be an elephant in the room with respect to the Fed outlook. Accordingly, Williams highlighted such concerns in his commentary, suggesting very negative effects on the economic outlook should tension escalate further. Markets now look ahead to a lighter flow of data on Wednesday, highlighted largely by the Fed Beige Book release.

On Tuesday, the minutes of RBA's April 3 board meeting noted that the members agreed that it was more likely that the next move in the cash rate would be up, rather than down. As progress in lowering unemployment and having inflation return to the midpoint of the target was expected to be only gradual, members also agreed that there was not a strong case for a near-term adjustment in monetary policy.

Taking into account the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Meanwhile, the S&P/ASX 200 index traded 0.08 percent higher at 5,841.5 by 03:10 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bearish at -26.19 (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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