Australian bonds slump tracking recovery in Coronavirus situation, Fed Chair Powell’s speech

The Australian bonds slumped during early trading hours Wednesday, as investors started to find some mid-week respite following the improvement in Coronavirus situation, further affirmed by Federal Reserve Chair Jerome Powell’s speech, delivered late in the overnight session.

Mr Powell stated that the current monetary policy stance is apt to support economic growth, a solid labour market and inflation returning to the Fed’s target range; however, eyes still remain on the deadly virus, its further spill-over impact and recovery that shook China to the core.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 4-1/2 basis points to 1.086 percent, the yield on the long-term 30-year bond also surged 4-1/2 basis points to 1.675 percent and the yield on short-term 2-year gained nearly 3 basis points to trade at 0.776 percent by 04:40GMT.

China, a country closely related by trade with most of the world economies, is still struggling with the humongous loss that the virus caused in the past few weeks and therefore, the Fed Chair noted that this outbreak might be the beginning of many more disruptions that will affect other trading partners as well, in particular the Asian peers.

In addition, the benchmark U.S. Treasury yields also rose overnight, further extending relief to its Asian counterparts, in response to a solid demand at the 3-year auction worth USD38 billion.

The Coronavirus has already been proved to be more dangerous than the SARS occurred in 2003, with the death toll rising to new heights every day and visitor arrivals expected to downgrade massively this year than what happened back then.

Lastly, the World Health Organization (WHO) has named the coronavirus COVID-19, even as Japan found registered 39 new cases on the cruise ship, bringing the total to 174.

Meanwhile, the S&P/ASX 200 index traded tad 0.35 percent higher at 7,021.50 by 04:45GMT.