Australian bonds fall across the curve as U.S.-China trade talks lift investors’ risk appetite

Australian bonds fell across the curve during early Asian session Tuesday as investors’ risk appetite recovered following the U.S.-China trade talks, lifting the 10-year yield from this year’s low seen yesterday.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1/2 basis point to 2.536 percent, the yield on the long-term 30-year bond also climbed 1 basis point to 3.039 percent and the yield on short-term 2-year remained 2 basis points higher at 2.013 percent by 03:00GMT.

"Sentiment was mostly positive ahead of upcoming trade talks between the US and China, although a news interview with Trump dented confidence later in the session. Trump accused China and Europe of manipulating their currencies. Trump also said he was “not thrilled” with Fed Chair Powell increasing interest rates. Share markets finished higher, while the US dollar and US bond yields fell,” said St.George Bank in its morning note.

"Yields on US Treasuries declined ahead of key Federal Reserve commentary this week and fell further after Trump expressed his dissatisfaction with rising interest rates. The minutes will be out on Wednesday, and Fed Chairman Powell will speak at the Fed’s annual Jackson Hole Conference on Friday. Yields on 10-year notes fell 4 basis points to 2.82 percent, while 2-year yields slipped 2 basis points to 2.59 percent."

The Reserve Bank of Australia (RBA) in its August meeting minutes noted that 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. Based on the forecasts, members assessed that the current stance of monetary policy would continue to support economic growth and allow further progress to be made in reducing the unemployment rate and returning inflation towards the midpoint of the target.

In these circumstances, members continued to agree that the next move in the cash rate would more likely be an increase than a decrease. However, since progress on unemployment and inflation was likely to be gradual, they also agreed there was no strong case for a near-term adjustment in monetary policy, the RBA added.

Meanwhile, the S&P/ASX 200 index traded 0.93 percent lower at 6,254.5 by 03:30GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 116.44 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex