Australian bonds gain as market jitters over Italian referendum result; RBA policy decision in focus

The Australian government bonds gained Monday as investors moved to safe-haven buying after the Italians voted against a constitutional reform during Sunday’s referendum, resulting in the resignation of Prime Minister Matteo Renzi.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 6 basis points to 2.80 percent, the yield on 15-year note dipped 1-1/2 basis points to 3.26 percent and the yield on short-term 2-year slid 3-1/2 basis points to 1.86 percent by 04:40 GMT.

Italian Prime Minister Matteo Renzi has resigned after suffering a heavy defeat in a referendum over his plan to reform the constitution. In a late-night news conference, he said he took responsibility for the outcome and said the No camp must now make clear proposals, reported BBC news.

With most ballots counted, the No vote leads with 60 percent against 40 percent for Yes. The turnout was nearly 70 percent, in a vote that was seen as a chance to register discontent with the prime minister, they added.

Moreover, the Reserve Bank of Australia (RBA) is widely expected to hold its official cash rate (OCR) steady at record low level of 1.50 percent in its monetary policy meeting scheduled on December 6. The central has already signalled in its last policy statement that it is done with cutting interest rate further to control price rise in the housing sector.

In terms of recent economic data, Australia’s retail sales came in above expectations again in October, implying a better start to fourth-quarter spending. Retail sales grew 0.5 percent in sequential terms in October, as compared with the market expectation of a rise of 0.3 percent and September’s rise of 0.6 percent. Australia’s retail sales are expanding at an annual rate of 3.5 percent.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.58 percent lower at 5,405.50 by 04:50 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at +53.03 (higher than +75 represents bullish trend).