Australian bonds jump ahead of RBA’s policy decision, Governor Lowe’s speech

The Australian bonds jumped at the start of the trading week Monday as investors wait to watch the Reserve Bank of Australia’s (RBA) monetary policy decision, followed by Governor Lowe’s speech, scheduled to be held on September 5 by 04:30GMT and 09:10GMT respectively. Also, due on Wednesday is the country’s Q2 GDP by 01:30GMT which will provide further direction to the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped nearly 2-1/2 basis points to 2.65 percent, the yield on 15-year note plunged nearly 3 basis points to 2.95 percent and the yield on short-term 2-year traded 1-1/2 basis points lower at 1.85 percent by 03:00 GMT.

Following strong rises in the previous two-quarters, Australia’s company profits fell 4.5 percent in Q2. The volatility continues to be largely driven by commodity prices, with mining profits down 11.5 percent q/q after an 11 percent rise in Q1. Non-mining profits were also a touch weaker (-0.6 percent q/q) although this follows two-quarters of strong gains, and on an annual basis, they are up 10.9 percent.

The RBA last made a move on its overnight cash rate 13 months ago which ended a near six-year cycle of rate cuts from 4.75 percent to its current record low of 1.5 percent. The Australian economy has had to readjust to lower mining revenues since the commodities boom of 2011-12, but the RBA believes this transition is almost complete and forecasts trend growth over the next few years at an annual 3 percent, reports said.

Meanwhile, the S&P/ASX 200 index plunged 0.84 percent to 5,675.50 by 03:00 GMT and the FxWirePro's Hourly AUD Strength Index remained slightly bullish at 80.40 (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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