Australian bonds plunge following weakness in U.S. treasuries; RBA Governor Lowe's speech in focus

The Australian bonds plunged Thursday, following weakness in the U.S. counterpart after the Federal Reserve announced its policy decision yesterday, announcing that it will begin its balance sheet normalization next month. Also, investors will now be looking forward to a speech from Governor Philip Lowe, scheduled today by 05:10GMT.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 2-1/2 basis points to 2.86 percent, the yield on 15-year note also surged 2-1/2 basis points to 3.15 percent and the yield on short-term 2-year also traded 1-1/2 basis points higher at 2.03 percent by 03:30GMT.

The September statement was fairly brief in this regard, saying only that, in October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

Elsewhere, the committee said that the economy continues to expand at a modest pace, led by household spending and business investment. The statement specifically referenced the disruption to activity due to Hurricanes Harvey, Irma, and Maria, with the committee signaling that it would be unlikely to change its assessment of the US economy over the medium term.

While energy prices have risen due to storm-related effects, the statement said these would only provide a temporary boost to inflation; the committee continues to expect that, on a 12-month basis, inflation is likely to “remain somewhat below two percent in the near term but to stabilize around the Committee's two percent objective over the medium term.

Meanwhile, the S&P/ASX 200 index plunged 1.32 percent to 5,625.50 by 03:35 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -25.88 (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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