Australian bonds plunge as investors cheer better-than-expected retail sales, riskier assets rally

The Australian government plunged Wednesday as investors cheered higher than expected retail sales data in August. Also, traders poured into safe-haven instruments amid losses in riskier assets including equities and crude oil.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 5 basis points to 2.144 percent, the yield on 15-year note jumped 7 basis points to 2.487 percent and the yield on short-term 2-year climbed 5 basis points to 1.659 percent by 05:00 GMT.

Australia August retail sales climbed 0.4 percnet m/m, higher than the market consensus of +0.2 percent m/m, well above July's 0.0 percent (flat) m/m result. The retail sales data has been a poor performer in recent months. The August beat is thus welcome, but it comes after many months of disappointment.

Moreover, the Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of Australia's target. Crude oil prices bounced above $50 a barrel after a report that U.S. fuel inventories may have fallen for a fifth straight week. The International benchmark Brent futures rose 0.86 percent to $51.31 and West Texas Intermediate (WTI) also jumped 0.99 percent to $49.17 at 05:00 GMT.

On Tuesday, the 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.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.03 percent higher to 5,444.5 by 05:00 GMT.