Australian bonds suffer on hopes of fall in December retail sales; investors eye RBA’s policy decision

Australian government bonds suffered at the start of the trading week Monday on hopes of a fall in the country’s retail sales for the month of December, scheduled to be released on February 6 by 00:30GMT, besides, the Reserve Bank of Australia’s (RBA) monetary policy meeting, due on the same day by 03:30GMT, which will add further direction to the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, remained tad higher at 2.90 percent, the yield on the long-term 30-year note hovered around 3.52 percent and the yield on short-term 2-year traded 1/2 basis point higher at 2.06 percent 05:10GMT.

The RBA is seen to keep the cash rate on hold, while commentary will be more upbeat after a positive run of data both domestically and globally. The higher AUD provides a bit of an offset and may see some refinement to the RBA’s commentary around the currency, but its move in trade-weighted terms since November is minimal and commodity prices are stronger; so there is not expected to be that much concern about the impact of the higher AUD/USD, ANZ Research reported.

"In terms of the RBA’s forecasts, the one substantive change we are looking for is a lower unemployment forecast. We think it is likely that the Bank will reduce the 2018 year-end forecast from 5-1/2 percent to 5-1/4 percent and predict 5 percent by the end of the forecast period," the report added.

Meanwhile, the S&P/ASX 200 index traded 0.20 percent lower at 5,969.5 by 05:20 GMT, while at 05:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -124.48 (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