Australian bonds remain mixed as investors await FOMC meeting, May employment report

The Australian bonds remained mixed Wednesday as investors remain keen to watch the Federal Open Market Committee’s (FOMC) monetary policy decision, scheduled to be unveiled later today. Also, market participants are awaiting the country’s employment report for the month of May, scheduled to be released on June 15, which shall provide further direction to the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 2.42 percent, the yield on the 15-year note fell nearly 1 basis point to 2.78 percent while the yield on short-term 2-year rose nearly 1 basis point to 1.63 percent by 04:10 GMT.

Markets are overwhelmingly expecting a 25 basis point interest rate hike from the US Federal Reserve when it concludes its two-day FOMC meeting on Wednesday. Futures markets as of Tuesday morning have priced-in an extremely high probability of this rate hike occurring – over 99 percent.

Further, a deterioration in Australia's jobs market may drive the nation's central bank to cut interest rates by early 2018, according to Franklin Templeton. Lastly, the swaps market is now pricing in about a 10 percent chance the Reserve Bank of Australia will lower its benchmark by year's end, a switch away from the view just two months ago when an increase was seen as more likely than a reduction.

Meanwhile, the ASX 200 index traded 0.60 percent higher at 5,770.50 by 04:30GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 130.15 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex