Australian bonds slump tracking soft U.S. Treasuries on broad selling pressure

The Australian bonds slumped Thursday, tracking weakness in the U.S. counterpart after the latter faced broad selling pressure on Wednesday after Fed chair Janet Yellen remained steadfast in her view that gradual rate rises are needed despite soggy inflation.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, jumped 4-1/2 basis points to 2.84 percent, the yield on the 15-year note also climbed 4-1/2 basis points to 3.11 percent and the yield on short-term 2-year traded 1-1/2 basis points higher at 1.97 percent by 02:35GMT.

Janet Yellen said late on Tuesday that despite tepid inflation, the US labor market continues to tighten at a rapid clip. As such, the Fed should be “wary of moving too gradually” in tightening monetary policy.

Confident comments from the Fed chief, as well as other top policymakers, have prompted Wall Street dramatically to increase its expectations for whether the Fed will lift its main interest rate again in December.

Federal funds futures now point to an 83.1 percent chance of a December rate increase, up from 73 percent a week ago, and 40 percent a month ago, according to CME Group calculations.

Meanwhile, the S&P/ASX 200 index traded 0.19 percent lower at 5,655.50 by 02:40 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -158.08 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest