Australian bonds gain following firmness in U.S. Treasuries; Q4 CPI in focus

Australian government bonds regained some ground on Wednesday in line with the U.S. Treasuries, where strong demand at an auction of two-year paper supported sentiment. Also, investors will now focus on the fourth quarter inflation data.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 3 basis points to 2.794 percent, the yield on the long-term 30-year note slid 3-1/2 basis points to 3.425 percent and the yield on short-term 2-year down 2 basis points to 2.078 percent by 03:40 GMT.

In the United States, Treasuries saw upward pressure across the curve during a relatively quiet session light on economic data of great significance. On the data front, markets were largely limited to a lackluster Richmond Fed manufacturing activity index release, decreasing to 14 in January, from 20 in December and a well-subscribed 2-year Note auction.

Markets now await a light flow of data on Wednesday, highlighted by existing home sales and Markit US/services PMI data, followed by a 5-year Note auction later in the session.

Meanwhile, the S&P/ASX 200 index traded nearly flat at 6,004.5 by 03:40 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -68.12 (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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