Australian bonds edge lower as employment index hits record high; unemployment rate disappoints

Australian government bonds edged slightly lower on Thursday after employment index for the month of April hits the highest level since the polling began in March 1997, pushing the benchmark 10-year bond yield to a 3-month high. However, disappointing unemployment rate paused the rise in the bond yields across the curve.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, rose 1-1/2 basis points to 2.904 percent (3-month high), the yield on the long-term 30-year Note jumped 1 basis point to 3.380 percent and the yield on short-term 2-year up 1/2 basis point to 2.070 percent by 03:00 GMT.

Employment conditions across Australia reached a record high last month in National Australia Bank’s (NAB’s) monthly business survey, amid overall above-average confidence among firms. According to the bank’s April figures, the employment index at +13 was, on a trend basis, at its highest level since the polling began in March 1997. NAB said this is consistent with a robust rate of jobs growth, of around 24K per month based on historical patterns. Australia added 22.6K jobs in April, reversing March’s fall of -0.7K. But the unemployment rate rose to 5.6% last month, up from 5.5% seen in March.

In the United States, Treasuries were little changed on Wednesday, hovering around recent lows, highlighted by the 10-year Note yield holding around the 3.10 percent mark as it looks to establish its thrust higher-  economists expect it will push towards 3.25-3.50 percent over the course of 2018.

In terms of speakers, markets received FOMC commentary from Atlanta Fed President Bostic, San Francisco Fed President Williams and St. Louis Fed President Bullard, each of which reiterated their long-held views with the former (two) showing continued support for gradual further tightening, while the latter to highlighted concerns related to potential yield curve inversion. Markets now look ahead to a greater flow of data on Thursday, highlighted by Philadelphia Fed manufacturing, jobless claims and Conference Board leading indicators data, followed by a 10-year TIPS auction later in the session.

Meanwhile, the S&P/ASX 200 index traded 0.20 percent lower at 6,098.5 by 03:35 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 135.87 (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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