Australian bonds plunge despite solid demand at government auction post-strongest rally in 6 weeks

The Australian bonds plunged Wednesday despite strong demand observed at a government auction after a single buyer snapped up the entire AUD800 million (USD609 million) bonds, the largest-ever amount bought by one bidder in auctions since 1982.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2 basis points to 2.59 percent, the yield on 15-year note also climbed 2 basis points to 2.94 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 1.70 percent by 05:40 GMT.

The sale of a nominal bond to just one entity has not happened since August 2013, according to data from the Australian Office of Financial Management (AOFM), the government funding arm. The 3.25 percent notes maturing in April 2029 went off at a yield of 2.72 percent, attracting a bid-to-cover ratio of 4.47, the AOFM said on its website, without identifying the buyer, Bloomberg Quint reported.

The sale came after government bonds had their strongest one-day rally in six weeks on Tuesday when the Reserve Bank of Australia dashed speculation it would join global counterparts such as the European and Canadian central banks in talking up policy tightening. Governor Philip Lowe also dropped a previous reference to an economic growth forecast of 3 percent and said the recent slowing in output partly reflected temporary factors, like weather, but not all of it.

Meanwhile, the ASX 200 index fell 0.11 percent to 5,728.50 by 05:50GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -119.68 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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