Australian bonds rally after U.S. Treasury yield closes near record-low following bulk hedging

The Australian government bonds rallied during Asian session Thursday after the U.S. Treasury yield closed near record-low following bulk hedging by investors against riskier assets such as oil and equities.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, edged nearly 1 basis point higher to 0.882 percent, the yield on the long-term 30-year bond surged 1-1/2 basis points to 1.485 percent and the yield on short-term 2-year remained flat at 0.726 percent by 06:00GMT.

The US made headlines on several fronts yesterday. Firstly, Treasury Secretary Steven Mnuchin said that the administration is “seriously considering” the issuance of ultra-long government bonds, i.e. bonds that are 50-100 years long, OCBC Treasury Research reported.

At present the longest-dated government bond lasts only 30 years. This move is largely seen as a way to fund the budget deficit and provides an extra avenue for the US government to continue spending, the report added.

Mnuchin also said that while there are no plans by the administration to directly intervene in the US dollar, he hopes future moves will be coordinated with the Federal Reserve – again bringing back into contention the risk of the Fed losing its independence, OCBC further noted.

Meanwhile, the S&P/ASX 200 index rose 0.25 percent to 6,481.50 by 06:10GMT.