Australian bonds sag as Brexit vote looms nearer

The Australian government bonds plunged ahead of the outcome of the Brexit poll later today which will decide whether Britian would remain in the European Union or not. Also, the RBA's neutral stance on Tuesday June meeting minutes discouraged investors from safe-haven buying.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price rose nearly 3 basis points to 2.257 percent and the yield on short-term 2-year note jumped more than 1 basis point to 1.736 percent by 05:00 GMT.

The recent polls showed the outcome of the referendum is too close to call. As latest online poll by YouGov showed 51 percent has voted in favour of 'Bremain', while remaining 49 percent voted for a 'Brexit'. Also, poll by the YouGov, 35 percent say its 'risky' to stay in the European Union, while 53 percent say it is 'safe' to stay in the EU.

Another UK phone poll by ComRes indicated 48 percent Britons voted to 'Remain' in the European Union, while 42 percent voted for 'Leave'; rest remained undecided.

Interestingly, according to Betfair the probability of the Remain camp winning in today's UK referendum has increased by 78 percent, according to response from the latest campaign polls.

On the other hand, last-minute UK poll from TNS showed 43 percent favouring Leave and 41 percent Remain and a new UK (online) poll by Opinium showed 45 percnet favouring leaving the EU and 44 percent in favour of remaining. This represents a shift to a pro-Brexit balance from pro-EU balances previously.

Referendum voting has officially begun in the United Kingdom at 6:00 GMT, about half an hour ago. Voting will continue for next 15 hours and will end at 21:00 GMT with the result likely known around this time tomorrow (0600GMT-0700GMT).

On Tuesday, the Reserve Bank of Australia in its June monetary policy board meeting minutes mentioned that appreciation of AUD could complicate adjustment of economy to the lower terms of trade and low interest rates and weaker AUD since 2013 have helped support above potential growth in Q1.

The board's decision to leave rates steady at June 7 meeting was consistent with sustainable growth and they added that Q2 growth to be more moderate, but year-ended growth should stay slightly above potential.

The meeting also noted the recent uncertainty about UK referendum on EU membership that has resulted in increased sterling volatility and growth in Australia's major trading partners moderated in Q1, as largely expected.

In addition, the Australian bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Reserve Bank of Australia's target. The International benchmark Brent futures rose 0.54 percent to $50.15 and West Texas Intermediate (WTI) climbed 0.57 percent to $49.41 by 05:00 GMT.

Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading higher 0.62 percent, or 32 points, at 5,233.5 by 05:00 GMT.