Australian bonds suffer tracking U.S. Treasuries after August consumer price inflation misses estimates

Australian bonds suffered during Asian session Friday tracking a similar movement in the United States Treasuries after the latter’s consumer price inflation (CPI) for the month of August missed market expectations.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slipped 1/2 basis point to 2.607 percent, the yield on the long-term 30-year bond also fell 1/2 basis point to 3.104 percent and the yield on short-term 2-year traded down 1-1/2 basis points to 2.029 percent by 03:30GMT.

The US CPI was weaker than expected with headline at 2.7 percent y/y and core at 2.2 percent. Apparel costs were a big driver of the decline – but apparel will be caught square in the trade wars if President Trump goes ahead with not only his proposed USD200bn of tariffs but his touted potential extra USD267 billion on top of that, ANZ Research reported.

The August inflation report shows that while inflation has picked up over the course of 2018, there are few signs of a breakout in price pressures. A strong U.S. dollar and a competitive retail sector are clearly helping to keep a lid on core goods prices. Services price pressures are hotter overall, but haven't really broken above a 3% pace since the spring, TD Economics reported.

Meanwhile, the S&P/ASX 200 index traded 0.17 percent higher at 6,169.5 by 03:35GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bullish at 175.29 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex