Australian bonds rally on risk-off sentiments following US’ announcement of additional tariffs on China

Australian government bonds rallied during Asian session of the first trading day of the week Monday, in continuation to investors’ risk-off sentiments after the United States late last week announced additional tariffs on Chinese goods, threatening stricter actions if no agreement is reached at the earliest.

Also, investors will be eyeing the Reserve Bank of Australia’s (RBA) monetary policy meeting, scheduled to be held on August 6 by 04:30GMT for further direction in the debt market.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, plunged nearly 7-1/2 basis points to 1.025 percent, the yield on the long-term 30-year bond also slumped 7-1/2 basis points to 1.695 percent and the yield on short-term 2-year suffered 6-1/2 basis points at 0.731 percent by 05:10GMT.

Markets continue to display risk-off behaviours, following the US decision to impose further tariffs on China last Thursday. The S&P 500 index is now at its lowest since end-June, while 10-year UST yields sunk further to 1.85 percent on Friday, OCBC Treasury Research reported.

"Downward pressure on Asian equities is expected to continue, following the downbeat sentiment in global markets since Thursday. Central banks will take most of the attention this week. The RBA will hold its policy meeting tomorrow, with all economists polled on Bloomberg expecting no change in the benchmark cash rate of 1 percent," the report added.

Meanwhile, the S&P/ASX 200 index suffered nearly 2 percent at 6,579.50 by 05:20GMT.