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Australian government bonds slumped across the curve during Asian session Tuesday after the Reserve Bank of Australia (RBA) reiterated that the next interest rate move will be a hike, in its October monetary policy meeting minutes, released earlier today. Investors will now keep an eye over the country’s employment report for the month of September, scheduled to be released on October 18 by 00:30GMT for further direction in the debt market.
The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 2 basis points to 2.723 percent, the yield on the long-term 30-year bond also surged 2 basis points to 3.201 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at 2.054 percent by 03:50GMT.
The RBA reiterated that “the next move in the cash rate would more likely be an increase than a decrease” but “there was not a strong case for a near-term adjustment in monetary policy”. There were familiar narratives in the minutes, which included ongoing expectations of above-trend growth over this year and next and a continued tightening of the jobs market, St. George Economics reported.
There were also new narratives, mainly around uncertainties. These included global growth clouds from trade issues and downside risks to domestic consumer spending. The RBA is also eyeing carefully any further tightening in credit conditions.
"On balance, we continue to expect that the RBA will stay on the sidelines, leaving the cash rate on hold this year and next year. Australian economic growth should continue to be supported by infrastructure spending, firm population gains and ongoing jobs growth. However, the risks around consumer spending and housing suggest caution is warranted," the report added.
Meanwhile, the S&P/ASX 200 index traded 0.62 percent higher at 5,848.5 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 63.31 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
