Australian bonds slump after UK government wins confidence vote; markets await China’s Q4 GDP data

Australian government bonds slumped across the curve during Asian trading session Thursday as the UK government led by Prime Minister Theresa May survived a no-confidence vote a day after the heavy defeat of her Brexit deal.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose 1 basis point to  2.286 percent, the yield on the long-term 30-year bond climbed 1/2 basis point to 2.830 percent and the yield on short-term 2-year up 1/2 basis point to 1.872 percent by 04:10GMT.

“Overnight’s key developments included UK PM May surviving a no-confidence vote and opening cross-party talks, U.S. House Speaker Nance Pelosi requesting president Trump to delay his State of the Union speech, and Fed’s Beige Book flagging that labor markets were tight and firms were struggling to find workers at any skill level, albeit growth has slowed, particularly in the auto, energy and no-financial sectors, and contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices and elevated trade and political uncertainty,” noted OCBC Bank.

Wall Street rose on the back of strong bank earnings from Goldman Sachs and Bank of America, albeit Nasdaq was weighed down by a WSJ report that federal prosecutors are pursuing a criminal case against Huawei Technologies for stealing trade secrets and Apple warned its will cut back on hiring for some divisions.

“Yields on the U.S. treasuries lifted, supported by the stronger risk environment. The U.S. 10-year yields were up 1 basis point to 2.72 percent. Oil prices rose, supported by a broader improvement in risk appetite, and an agreement to supply cuts by OPEC.  Prices of other commodities also rose, despite the stronger dollar,” noted St.George Bank.

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 5,791.50 by 04:20 GMT, while at 04:00 GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -44.91 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex