Australian bonds slump as investors remain optimistic amid mixed economic data

The Australian government bonds slumped Thursday as investors witnessed a mixed bag of economic results, but there were adequate signs of development in business investment to keep traders away from safe-haven buying.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose more than 1 basis point to 1.903 percent and the yield on short-term 2-year bounced 2 basis points to 1.471 percent by 05:00 GMT.

Australia’s second quarter headline business spending fell 5.4 percent q/q, market was expecting 4 percent q/q decline, from down 5.2 in the previous quarter. Moreover, firms upgraded third estimate plans for the 2016/17 financial year that signalled that the outlook for business investment may be improving in the near future.

Moreover, Australia’s July retail sales also disappointed market, it remained unchanged at 0.0 percent m/m, market was expecting as rise of 0.3 percent, from up 0.1 percent in June, but a stronger rise in home prices boded well for household wealth. Australia August Corelogic house price index jumped 1.1 percent m/m, from +0.8 percent in July. On an annual basis, it was up 7 percent y/y, compared to 6.1 percent prior from the same period a year ago.

In addition, investors were also relishing a higher Chinese official manufacturing PMI, which rose to 50.4 in August, higher than the consensus of 49.8, as compared to 49.9 in July.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.37 percent higher to 5,408.5 by 05:00 GMT.