Australian bonds plunge after RBA keeps interest rate steady at record low

The Australian government plunged Tuesday after Reserve Bank of Australia kept its official rate unchaged at 1.50 percent after cutting 25 basis points in August.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 13 basis points to 2.082 percent, the yield on 15-year note jumped 12 basis points to 2.420 percent and the yield on short-term 2-year climbed 6-1/2 basis points to 1.615 percent by 04:20 GMT.

Reserve Bank of Australia in its monetray policy meeting left interest rates unchanged at 1.5 percent as it weighs the effect of past easing and the biggest-ever boom in apartment building helps underpin economic activity and jobs growth.

The new central bank Governor Philip Lowe said that the global economy is continuing to grow, at a lower than average pace. Labour market conditions in the advanced economies have improved over the past year, but growth in global industrial production and trade remains subdued. Actions by Chinese policymakers have been supporting growth, but the underlying pace of growth in China has been moderating. Inflation remains below most central banks' targets.

Morever, commodity prices have risen over recent months, following the very substantial declines over the past few years. The higher commodity prices have supported a rise in Australia's terms of trade, although they remain much lower than they have been in recent years. Financial markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative. Government bond yields are near their historical lows.

In Australia, the economy is continuing to grow at a moderate rate. The large decline in mining investment is being offset by growth in other areas, including residential construction, public demand and exports. Household consumption has been growing at a reasonable pace, but appears to have slowed a little recently. Measures of household and business sentiment remain above average.

Labour market indicators have been somewhat mixed. The unemployment rate has fallen further, although there is considerable variation in employment growth across the country. Part-time employment has been growing strongly, while growth in full-time employment has been subdued. The forward-looking indicators point to continued expansion in employment in the near term.

Lastly, investors remained keen to focus on the series of upcoming economic data, highlighted by retail sales,trade balance and RBA Assistant Governor Kent speech.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.13 percent higher to 5,449.5 by 04:30 GMT.