Australian bonds gain tracking U.S. Treasuries despite signing of Phase 1 trade deal with China

The Australian bonds gained during Asian session Thursday, tracking a similar movement in the U.S. Treasuries as investors shrugged-off the signing of Phase 1 trade deal between China and the United States, trying to read beyond the lines.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 1.181 percent, the yield on the long-term 30-year bond plunged nearly 3-1/2 basis points to 1.790 percent and the yield on short-term 2-year lost nearly 2 basis points to 0.784 percent by 04:25GMT.

Finally, US and China signed the Phase 1 Deal. In return for US halving its 15% tariffs on USD120bn of Chinese imports to 7.5%, China agreed to purchase 200bn more American goods over two years, and to step up intellectual property protection. While market would obviously take to the deal positively, it would likely be one of relief rather than elation, OCBC Treasury Research reported.

Market is also going to be paying closer attention to the breakdown of the goods purchases slated in the deal. The bulk of it is reportedly going to be via a USD75bn increase in manufactured goods purchase, followed by USD50 billion in energy and USD35-40 billion in services, the report added.

Meanwhile, the S&P/ASX 200 index traded tad 0.46 percent higher at 6,978.50 by 04:30GMT.