Australian bonds slump ahead of RBA Assistant Gov Debelle’s speech, Fed Chair Powell’s testimony

Australian government bonds slumped during Asian trading session Wednesday ahead of the Reserve Bank of Australia’s (RBA) Assistant Governor Guy Debelle’s speech, due to be held on July 11 by 06:40GMT and most importantly, Federal Reserve Chair Jerome Powell’s scheduled testimony tomorrow, which shall guide markets thoroughly.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 2-1/2 basis points to 1.351 percent, the yield on the long-term 30-year bond surged 2 basis points to 1.977 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 0.981 percent by 05:30GMT.

Investors are essentially now awaiting Fed chair Powell’s congressional testimony to the House of Representatives today and the Senate tomorrow, coupled with the June FOMC minutes also due today and ECB minutes to follow tomorrow, OCBC Treasury Research reported.

While a 25bp rate cut is still priced in for the end-July FOMC meeting, nevertheless the better-than-expected nonfarm payrolls (NFP) data last Friday had cast doubt over the need for further Fed rate cuts beyond July. Fed’s Harker (non-voter) had also cautioned that “there’s no immediate need to move rates in either direction at this point in my view” given the strong US economy.

"Our house view remains that the Fed will cut rates by 25bps end-July and leave the door open for further insurance cuts if need be, notwithstanding the healthy NFP data", the report further commented.

Meanwhile, the S&P/ASX 200 index fell -0.26 percent to 6,600.50 by 05:35GMT