Australian bonds suffer following ease in global recession fears; RBA hints at further easing

The Australian government bonds suffered during Asian session of the second trading day of the week Tuesday following investors’ improved appetite after global recession fears eased, tracking hopes of stimuli from major economies like China and Germany to support the ailing economies.

However, the downside in bond prices was capped by the Reserve Bank of Australia’s (RBA) hint at further monetary policy easing in its August meeting minutes, released early today.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, jumped 2-1/2 basis points to 0.952 percent, the yield on the long-term 30-year bond surged 3 basis points to 1.542 percent while the yield on short-term 2-year traded steady at 0.751 percent by 04:50GMT.

The minutes from the RBA read: "Having eased monetary policy at the previous two meetings, the Board judged it appropriate to assess developments in the global and domestic economies before considering further change to the setting of monetary policy. Members would consider a further easing of monetary policy if the accumulation of additional evidence suggested this was needed to support sustainable growth in the economy and the achievement of the inflation target over time."

"The global news flow has been more negative, but not enough on its own to meet the RBA’s threshold in our view. Together this suggests a September rate cut is unlikely. We think October is in play, however, with some critical data due between the September and October board meetings such as Q2 GDP, business and consumer sentiment readings and labour market data," ANZ Research commented in its latest report.

Meanwhile, the S&P/ASX 200 index edged tad 0.68 percent higher to 6,481.50 by 04:55GMT.