Australian bonds slump as investors’ sentiment recover after 9-day rout; UST 10-year yield pare losses

Australian government bonds slumped across the curve during Asian session on Friday as investors’ sentiment recovered after 9-day of stocks rout. Also, the United States 10-year Treasury yield pared losses, supporting the Aussie debt yields after Treasury Department said they will not call China a currency manipulator.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose over 3 basis points to 2.763 percent, the yield on the long-term 30-year bond also surged 3-1/2 basis points to 3.242 percent and the yield on short-term 2-year climbed 4 basis points to 2.063 percent by 03:50GMT.

The U.S. stock futures recovered in early Asia session on Friday after media reported that the US Treasury Department will not call China a currency manipulator in an upcoming report.  Following this, the U.S. 10-year bond yield rose over 4 basis points to 3.172 percent

“The US 10-year treasury yield mostly consolidated - ranging between 3.14 percent and 3.19 percent. It has closed 4bp lower at 3.17 percent. The 2-year yield, which had lost 8bp since 10 October, rebounded from 2.82% to 2.87%, before slipping back to 2.84 percent. Fed fund futures yields slightly pared the chance of another rate hike in December from 80-75 percent,” noted OCBC Bank.

On the other hand, the International Monetary Fund (IMF) Managing Director Christine Lagarde warned overnight countries against engaging in trade and currency wars that hurt global growth and imperil "innocent bystanders." Lagarde further urged countries to "de-escalate" trade conflicts and fix global trading rules instead of abandoning them.

But, U.S. President Donald Trump said he won't fire Fed chief Jay Powell but blamed an "out of control" US central bank for the market rout. He lashed out at the bank for a second straight day, saying that the Fed's interest rate increases are "not necessary in my opinion and I think I know about it better than they do."

It is worth noting that it was a quiet data day in Australia and New Zealand so far.

Meanwhile, the S&P/ASX 200 index traded 1.87% higher at 5,884.5 by 04:00 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 66.19 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex