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Australian government bonds plunged during early Asian trading session on Monday tracking sell-off in the U.S. Treasuries. The U.S. Treasury yields rose on Friday on better-than-expected U.S. payroll numbers in June, helping the Australian 10-yer yield to rise about 4 basis points.
The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose nearly 4 basis points to 1.325 percent, the yield on the long-term 30-year bond also climbed 4 basis points to 1.972 percent and the yield on short-term 2-year traded about 4 basis points higher at 0.976 percent by 05:05GMT.
The U.S. Treasury yields rebounded strongly across the curve while the dollar index rose after the data. The 224K non-farm job increase, which does not justify a rate cut in normal circumstance, is likely to make the Fed’s job harder in July’s meeting, OCBC Treasury Research reported.
Just after the jobs report, yields on U.S. interest rates rebounded sharply. The 10-year yield jumped 8 basis points to 2.03 perent. At the shorter-end of the curve, 2-year yields surged 11 basis points to 1.86 percent. Markets are continuing to fully price in a 25 basis point rate cut at the Fed’s next meeting at the end of this month, and two rate cuts by the end of this year, however expectations of more aggressive cuts have been pared, St.George Bank reported.
From the perspective of an insurance cut, the current data is probably not strong enough to rule out the Fed’s commitment for a pre-emptive move, although it may temper expectations of an aggressive insurance cut of 50bps in July. Market will closely watch out for Fed chairman Powell’s testimony to Congress on Wednesday and Thursday amid the renewed attack from President Trump, who repeated his call for the Fed to lower its interest rates to boost the economy last Friday, the report added.
“Good news was once again bad news for shares. The U.S. shares lost ground as the strong jobs report tempered expectations of Federal Reserve easing. The Dow and S&P500 fell 0.2 percent,” St.George Bank added.
Meanwhile, the S&P/ASX 200 index fell 1.01 percent to 6,615.50 by 05:10GMT, while at 04:00GMT.
