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Australian government bonds edged tad higher towards end of Asian session of the second trading day of the week Tuesday after the Reserve Bank of Australia (RBA) cut its benchmark Overnight Cash Rate (OCR) by 25 basis points to 1 percent, matching market expectations as well.
The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1 basis point to 1.335 percent, the yield on the long-term 30-year bond remained tad lower at 1.947 percent and the yield on short-term 2-year slumped nearly 3 basis points to 0.960 percent by 05:50GMT.
Growth in the Australian economy has slowed and inflation remains low. Subdued growth in household income and the adjustment in the housing market are affecting consumer spending and residential construction. Despite this, the labour market is performing reasonably well, with the unemployment rate steady at around 5 percent, the Statement on Monetary Policy reported.
GDP growth is expected to be around 2¾ per cent over both 2019 and 2020. This is lower than previously forecast, reflecting the revised outlook for household consumption spending and dwelling activity.
Further, global financial market conditions have eased further in recent months. Conditions have become more accommodative since the beginning of the year, unwinding the sharp tightening that occurred at the end of 2018. Major central banks have been signalling that they are likely to maintain more accommodative monetary policy than had previously been expected. These revised expectations have flowed through to market pricing, taking sovereign bond yields to low levels, the statement added.
Meanwhile, the S&P/ASX 200 index remained tad -0.18 percent lower at 6,594.50 by 05:55GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 46.54 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
