Australian bonds shrink on profit-booking, upbeat Chinese GDP

The Australian government bonds shrank Friday, investors cashed in profits on the last trading day of the week after relishing previous gains, observing a relatively subdued trading session. Also, an upbeat reading of China’s gross domestic product (GDP) further dragged the country’s debt market, with the 10-year yields still maintaining 2-week highs.

Further, Federal Reserve Chair Janet Yellen’s overnight comments, although less hawkish, added to the cause.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1/2 basis point to 2.79 percent, the yield on 15-year note also moved 1/2 basis point higher to 3.24 percent and the yield on short-term 2-year moved higher nearly 1 basis point to 1.90 percent by 05:05 GMT.

China’s economy expanded 6.8 percent for the whole year of 2016, as widely expected. The stabilization of the economy was largely due to the rally in the property market, which has also triggered concerns of asset bubble. In the coming year, China is expected to put more effort to balance the growth, financial risks and external challenges especially from Trump.

Janet Yellen, while speaking at the Stanford Institute for Economic Policy Research, repeated that the economy remains on a strong footing; however, expects further renewed momentum in the labor market.

She further added that inflation rate will hit the Fed's target band in the next couple of years. She added that the central bank’s monetary policy stance remains accommodative and the downside risk to its balance sheet likely to witness a decline in the near-term. Lastly, she said that fiscal policy may alter growth outlook, albeit at the cost of uncertainties.

Meawhile, the ASX200 index traded 0.43 percent down at 5,601.50 percent at 05:20GMT, while at 5:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 38.78 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex