Australian bonds gain after U.S. 10-year Note yield dips below 3 pct mark; eyes on RBA’s policy decision

Australian government bonds gained on Friday as a fresh wave of buying pressured the U.S. 10-year Treasury note rate to under 3 percent mark. Markets will now eye the Reserve Bank of Australia (RBA) monetary policy decision of next week, where it is widely expected do nothing.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 4-1/2 basis points to 2.836 percent, the yield on the long-term 30-year Note also dipped 5 basis points to 3.390 percent and the yield on short-term 2-year down 2 basis points to 2.107 percent by 03:00 GMT.

In the United States, Treasuries rebounded overnight stemming the recent decline that has largely defined the complex. Overall, this all served to stunt recent gains in the 10-year Note yield, pushing it back below the 3.00 percent mark. With respect to data, markets were greeted by stronger than expected durable goods orders, increasing +2.6 percent m/m in March, versus +3.5 percent m/m increase seen in February and initial jobless claims, decreasing -24K to 209K, marking its lowest level since 6 December 1969.

Additionally, markets also saw solid improvement in the advance goods trade balance, decreasing to -$68.0 billion in March, versus -$75.9 billion in February and wholesale inventories releases, increasing +0.5 percent m/m, in line with expectations. Markets now look ahead to a greater flow of data to finish off the week on Friday, highlighted by employment cost index, advance 1Q18 GDP and University of Michigan consumer sentiment releases.

On Tuesday, the Consumer Price Index (CPI) rose 0.4 percent in the March quarter 2018, the latest Australian Bureau of Statistics (ABS) figures reveal. This follows a rise of 0.6 percent in the December quarter 2017. That was below the market expectations of 0.5 percent growth. This lower-than-expected inflation could derail the RBA interest rate hike this year. We do expect one interest rate hike in 2019.

Meanwhile, the S&P/ASX 200 index traded 0.46 percent lower at 5,912.5 by 03:25 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -5.51 (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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