Australian bonds plunge after RBA maintains balance view in June meeting minutes

The Australian bonds plunged Tuesday after the Reserve Bank of Australia (RBA) remained slightly positive over the economic outlook of the country, mentioning the developments till date. However, it did not completely shrug off the risks that remain vital to the country in the short-to-medium term.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1-1/2 basis points to 2.44 percent, the yield on the 15-year note climbed 1-1/2 basis points to 2.80 percent while the yield on short-term 2-year traded 1 basis point higher at 1.70 percent by 04:20 GMT.

In the latest RBA June meeting minutes, released earlier today, International economic conditions were noted to be improving although headline inflation had eased and core inflation remained low. The central bank pre-empted the weak Q1 Australian GDP numbers, which were released the day after the meeting, but noted that it would not read more into them as they reflected "quarter-to-quarter variation in the growth figures".

The minutes said the “magnitude of the major bank levy was not particularly large compared with typical market movements in bank funding costs.” The Standard & Poor's rating downgrade for a number of the smaller Australian financial institutions would lead to "some effect" but "these institutions accessed less wholesale funding than the major banks".

Meanwhile, the ASX 200 index traded 0.63 percent lower at 5,716.50 by 04:50GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 16.19 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex