Australian bonds remain range bound amid global economic slowdown; Brexit vote in focus

Australian government bonds remained range bound during Asian trading session Monday as last week’s weak U.S. payrolls weighed on investor sentiment, raising fear of a global economic slowdown.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, traded 1/5 basis points higher at 2.028 percent, the yield on the long-term 30-year bond rose 1-1/2 basis points to trade at 2.616 percent and the yield on short-term 2-year traded tad higher at 1.678 percent by 04:20GMT.

“Weak headline U.S. payrolls weighed on investor sentiment, although moves were muted given some positive aspects within the details. The U.S. stock market weakened, bond yields edged lower and the U.S. dollar fell,” noted St.George Bank.

“The U.S. bond yields fell following the release of soft employment data, but retraced most of those losses later in the session to finish slightly lower. The yield on the 10-year U.S. government bond fell by 1 basis point to 2.63 percent. The yield on the 2-year US government bond also fell 1 basis point to 2.46 percent.”

Asian markets are expected to trade with a more cautious line as traders continue to digest the disappointed U.S.’ employment report.

This week, key events to watch include Brexit developments.

“A key vote on PM May’s deal tomorrow is likely to be defeated again, but the margin of defeat may pave the way to many different outcomes (eg. referendum, May stepping down etc), with a further Thursday vote whether to extend Article 50, and in turn create additional uncertainties in the interim,” OCBC Bank noted.

Meanwhile, the S&P/ASX 200 index traded tad 0.04 higher at 6,195.50 by 04:25GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained slightly bullish at 81.60 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex