Australian bonds sag as U.S.-China trade talks progress; 10-year yield jumps 3bps

Australian government bonds slumped across the curve during Asian trading session Friday as better-than-expected U.S. economic data and progress in U.S.-China trade talks helped investors to move from safe-haven buying.

Risk sentiment was boosted by a news report that U.S. Treasury Secretary Mnuchin is about to lift bans on the Chinese import, although, he denied the comment later. However, that news was enough to boost bond yields, stocks and the AUD.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 3 basis points to  2.315 percent, the yield on the long-term 30-year bond climbed 2 basis points to 2.849 percent and the yield on short-term 2-year up 2-1/2 basis points to 1.891 percent by 03:50 GMT.

“Yields on U.S. treasuries rose in step with stronger risk appetite and on stronger-than-expected economic data. Yields on 10-year notes rising 2 basis points to 2.75 percent, lifting on the Philadelphia manufacturing release, and then again on the report the US could halt Chinese tariffs,” noted St.George Bank.

On the currency ANZ said the Australian dollar remained relatively well supported amid U.S. dollar strength, as broader sentiment improved. In a quiet data day it will likely remain locked in familiar ranges.

Lastly, markets will closely watch China’s Q4 GDP growth which is scheduled be released on January 24 at 0200 GMT. We expect the growth to fall to 6.4 percent in the last quarter of 2018.

Meanwhile, the S&P/ASX 200 index traded 0.03 percent higher at 5,822.50 by 04:20 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 6.48 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex