Australian bonds jump sharply ahead of RBA monetary policy decision

The Australian bonds jumped sharply ahead of the Reserve Bank of Australia’s (RBA) monetary policy decision scheduled to be held today.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, plunged 6-1/2 basis points to 2.62 percent, the yield on 15-year note also plunged nearly 6-1/2 basis points to 2.99 percent and the yield on short-term 2-year traded 3-1/2 basis points lower at 1.72 percent by 03:20 GMT.

The RBA’s policy decision today is expected to show no policy change, with the cash target rate remaining at 1.5 percent. After a shocking -0.5 percent fall in Q3 gross domestic product (GDP), Australia's Q4 GDP rebounded a strong 1.1 percent q/q, beating forecasts for a 0.7 percent rise. Australia thus avoided the country’s first technical recession in more than two decades.

On the positive side, Australia's consumer spending picked up strongly in Q4 with a rise of 0.9 percent. There was a relatively broad-based improvement. Analysts doubt though that this strength is sustainable given high levels of household debt and ongoing low wages growth. The nation's current account balance also improved sharply in Q4. Retail sales data due March 6th will be closely watched to see how household spending started the year, following robust private consumption in Q4.

Meanwhile, the ASX 200 index traded 0.02 percent up at 5,849.50 by 03:20GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -132.67 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex