Australian bonds jump sharply after Q4 CPI disappoints market expectations

Australian government bonds jumped sharply during early Asian session Wednesday as the country’s fourth-quarter consumer price inflation data disappointed market expectations, although remaining unchanged on a q/q basis.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped nearly 4-1/2 basis points to 2.80 percent, the yield on the long-term 30-year note also plunged 4-1/2 basis points to 3.41 percent and the yield on short-term 2-year traded 6 basis points lower at 2.09 percent 04:35GMT.

The country’s Q4 CPI rose by 0.6 percent q/q, the same quarterly pace as the previous quarter, lifting annual inflation marginally to 1.9 percent y/y, from 1.8 percent y/y. As expected, headline inflation was boosted by seasonal increases for tobacco (+8.5 percent) and domestic holiday and travel and accommodation (+6.3 percent), as well as rises for fuel (+10.4 percent) and fruit (+9.3 percent).

Both the trimmed mean and weighted median rose by 0.4 percent q/q in Q4, in line with the previous quarter. The average of the two measures was 0.42 q/q, and it was steady at 1.9 percent in y/y terms. CPI ex-volatiles (seasonally adjusted) was a touch softer, up 0.3 percent q/q but a still solid 1.9 percent y/y.

Meanwhile, the S&P/ASX 200 index traded 0.70 percent higher at 5,982.5 by 04:45 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -54.82 (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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