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Australian government bonds jumped across the curve during Asian trading session Monday even as trade talks progressed between the United States and China, with President Donald Trump also stating an extension of the March 1 deadline, in lieu of the ongoing progress.
Further, Australia’s benchmark stock index, ASX 200 also pulled back from continuous gains, albeit at a softer rate, adding to gains in the bond prices.
The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged 2-1/2 basis points to 2.072 percent, the yield on the long-term 30-year bond slumped 2 basis points to 2.628 percent and the yield on short-term 2-year hovered around 1.727 percent by 04:30 GMT.
Risk sentiment improved further on trade talk hopes. President Trump announced on Sunday that he will extend the deadline to raise tariff on Chinese goods until his meeting with President Xi possibly in Florida to ink a final deal.
As both Presidents said significant progress has been made, the chance for the US and China to reach a deal is getting higher. However, the key to medium term stability hinges on two areas including agreement on China’s structural reforms and the enforcement of trade deals.
Despite the positive risk sentiment, underlying fundamental continued to weaken with the latest economic data surprising the market on the downside. US existing home sales fell to 4.94 million below market expectation while the German IFO business sentiment fell for the sixth time to 98.5 in February, lowest since December 2014. Elsewhere, China said its imports of coal from Australia continued as per normal helping Australian dollar recoup some of the losses, OCBC Treasury Research reported in its Daily Treasury Outlook.
Meanwhile, the S&P/ASX 200 index slipped 0.52 percent to 6,125.50 by 04:35 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 74.07 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
