Australian bonds maintain downtrend tracking U.S. Treasuries on optimistic trade deal news

The Australian government bonds continued to down trend during Asian session Wednesday tracking a similar movement in the United States’ Treasuries after optimism struck over the U.S.-China trade deal, urging investors to shift towards riskier assets.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 3-1/2 basis points to 1.251 percent, the yield on the long-term 30-year bond surged 3 basis points to 1.826 percent while the yield on short-term 2-year remained flat at 0.897 percent by 03:30GMT.

Market sentiment has turned a bit more tentative on latest trade war news. China is reportedly insisting on a rollback of existing US tariffs, rather than just a cancellation of new tariffs, as the price for signing any Phase 1 deal with the US, according to Global Times editor Hu Xijin, who has positioned himself as the unofficial spokesperson for the authorities. One way to look at it is that it is merely a negotiating tactic by China, OCBC Treasury Research reported.

"The USD/CNH was suppressed to levels south of 6.9900, before rebounding to close just above the 7.0000 mark, on the back of further Sino-US positivity. Overnight USD resilience may impart some upside pressure on USD/Asia today. However, given the lead from USD/CNH (and a stronger than expected USD/CNY fix), any upside in USD-Asia should be limited," OCBC commented in a separate report.

Meanwhile, the S&P/ASX 200 index slipped -0.22 percent to 6,653.50 by 03:35GMT.