Australian bonds gain tracking firmness in U.S. Treasuries; RBA Governor Lowe's speech in focus

Australian government bonds gained on the first trading day of the week Monday tracking firmness in the U.S. Treasuries. Markets now await Reserve Bank of Australia (RBA) Governor Lowe speech scheduled for Wednesday, May 23 for gauge future policy action.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 4-1/2 basis points to 2.874 percent, the yield on the long-term 30-year Note dipped 5 basis points to 3.363 percent and the yield on short-term 2-year down 2 basis points to 2.042 percent by 03:30 GMT.

In the United States, Treasuries saw upward pressure across the curve during a relatively quiet Friday session light on economic data of great significance. With respect to speakers, FOMC commentary was largely limited to overnight remarks by Cleveland Fed President Mester and a morning speaking engagement by Fed Governor Brainard. However, both instances were largely focused on bank regulation, shying away from any discussion of monetary policy or the economic outlook.

Markets now look ahead to a lighter flow of data, highlighted by minutes from the 1-2 May FOMC meeting on Wednesday and April durable goods orders data on Friday. Additionally, markets receive 2-year Note, 5-year Note and 7-year Note auctions on Tuesday, Wednesday and Thursday, respectively.

In addition, heaving sell-off in the Australian bonds observed last week was due strong employment report released on Thursday, in which, employment conditions across Australia reached a record high last month in National Australia Bank’s (NAB’s) monthly business survey, amid overall above-average confidence among firms. According to the bank’s April figures, the employment index at +13 was, on a trend basis, at its highest level since the polling began in March 1997. NAB said this is consistent with a robust rate of jobs growth, of around 24K per month based on historical patterns. Australia added 22.6K jobs in April, reversing March’s fall of -0.7K. But the unemployment rate rose to 5.6% last month, up from 5.5% seen in March.

Meanwhile, the S&P/ASX 200 index traded 0.26 percent higher at 6,087.5 by 03:30 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 141.11 (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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