Australian bonds plunge tracking U.S. Treasuries on hopeful U.S.-China trade deal; RBA policy meeting eyed

Australian government bonds plunged during Asian trading session Monday tracking a similar movement in the United States’ counterpart as investors still remain hopeful over a trade agreement between the latter and China before March 27.

Market participants will also be eyeing the Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled to be unveiled on March 5 by 03:30GMT, which will provide further direction to the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 4-1/5 basis points to 2.192 percent, the yield on the long-term 30-year bond also surged 4-1/2 basis points to trade at 2.757 percent and the yield on short-term 2-year climbed nearly 2-1/2 basis points to 1.759 percent by 04:00GMT.

Following the collapse of the Trump-Kim summit last week, all eyes are on the supposedly upcoming US-China trade deal with the Trump-Xi summit likely to follow later this month.

Wall Street climbed on Friday, while the UST bond yields sold off, pushing the 10-year yield up to 2.76 percent and steepening the yield curve. True to form, President Trump again criticised the USD as too strong and Fed chair Powell as someone who “likes raising interest rates”, OCBC Treasury Research reported.

Australia’s Q4 business indicators data were weaker than anticipated, with profits, inventories and wages all below forecasts.  Together, these numbers provide a downside risk to a forecast of a 0.2 percent q/q rise in Q4 GDP, due on Wednesday, and raise the prospect that GDP could print negative in the quarter, ANZ Research reported.

Meanwhile, the S&P/ASX 200 index traded flat at 6,205.50 by 04:10GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -58.42 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex