Australian bonds edge lower following weakness in U.S. Treasuries after Trump appease China on trade worries

Australian government bonds slumped on Tuesday following weakness in the U.S. Treasuries as investors’ risk appetite improved on optimism in Wall Street after the United States President Donald Trump tried to appease China on trade worries.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose nearly 3 basis points to 2.695 percent, the yield on the long-term 30-year note climbed 2-1/2 basis points to 3.290 percent and the yield on short-term 2-year also surged nearly 2 basis points to 2.053 percent by 02:40 GMT.

In the United States, Treasuries were little changed to open the week on Monday during a relatively quiet session light on data of great significance. Markets now look ahead to a greater flow of data on Tuesday, highlighted by NFIB small business optimism, producer prices and wholesale inventories releases, followed by a 3-year Note auction later in the session.

On balance, none of these releases are likely to have a great impact on near-term market dynamics with the continued focus on escalating trade tensions between the US and China, alongside increased geopolitical concerns related to a potential US response to a chemical attack in Syria.

As the 10-year Note yield continues to hover around the 2.80 percent-mark we look for incoming data to eventually begin to define its near-term direction, potentially finding some confirmed support higher followed the CPI release on Wednesday.

Meanwhile, the S&P/ASX 200 index traded 0.79 percent higher at 5,837.5 by 03:00 GMT, while at 02:40GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 147.63 (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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