Australian bonds remain mixed in muted session post better-than-expected trade surplus

The Australian bonds traded mixed Thursday as investors remained muted in a silent trading session after witnessing a solid demand at a government auction early Wednesday, where a single buyer snapped up the entire AUD800 million (USD609 million) bonds, the largest-ever amount bought by one bidder in auctions since 1982.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1 basis point to 2.58 percent, the yield on 15-year note also slipped 1 basis point to 2.93 percent while the yield on short-term 2-year traded 1 basis point higher at 1.71 percent by 03:30 GMT.

Australia’s trade balance widened substantially in May, with the trade surplus rising to AUD2.5 billion from a downwardly revised AUD90 million in April. This was much stronger than expected by the consensus and ourselves. The sharp improvement in the trade balance was entirely driven by a turnaround in resource exports (up 15.1 percent m/m).

The sale came after government bonds had their strongest one-day rally in six weeks on Tuesday when the Reserve Bank of Australia dashed speculation it would join global counterparts such as the European and Canadian central banks in talking up policy tightening. Governor Philip Lowe also dropped a previous reference to an economic growth forecast of 3 percent and said the recent slowing in output partly reflected temporary factors, like weather, but not all of it.

Meanwhile, the ASX 200 index fell 0.19 percent to 5,709.50 by 04:30GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -124.09 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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