Australian bonds slump on improvement in risk appetite; 10-year yield up about 2bps

Australian government bond slumped during early Asian session Friday amid rebound in risk  sentiment on the hopes that the U.S. tariffs on Mexico could be delayed.

“Yields on the U.S. Treasuries continued to hold at low levels despite the improvement in risk appetite. Expectations of monetary easing by central banks are keeping yields under downward pressure. The U.S. 10-year yield fell 2 basis points to 2.12 percent,” noted St.George Bank.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose nearly 2 basis points to 1.484 percent, the yield on the long-term 30-year bond also jumped over 1 basis point to 2.135 percent and the yield on short-term 2-year traded surged about 3 basis points to 1.093 percent by 04:00GMT.

The U.S. stocks rose for the third consecutive day on Thursday on the back of hopes that a deal may be reached between U.S. and Mexico to avert the planned 5% tariff. The outline of an immigration deal is being discussed by both officials, according to a report from Washington Post, said OCBC Bank.

However, there is still no sign of de-escalation for the US-China trade war. President Trump said yesterday that he will decide whether he will impose additional tariff on the remaining at least U$300 billion Chinese imports after the G20 meeting.

Moreover, on Tuesday, the Reserve Bank of Australia (RBA) cut its benchmark interest rate to its historic low by 25 basis points to 1.25 percent, with an aim to assist faster progress in reducing unemployment and achieve more assured progress towards the inflation target.

“We see the Governor’s speech at Tuesday’s RBA Board dinner as effectively a call to action for monetary policy. We now expect the RBA to cut in August and November,” noted ANZ.

Meanwhile, the S&P/ASX 200 index rose 0.1 percent to 6,423.5 by 04:00GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -18.58 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex