Australian bonds surge as investors await May employment report

Australian government bonds surged during early Asian session Wednesday amid a muted trading session that witnessed data of little economic significance ahead of the country’s employment report for the month of May, scheduled to be released on June 13 by 01:30GMT.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped 2-1/2 basis points to 1.444 percent, the yield on the long-term 30-year bond plunged 3 basis points to 2.083 percent and the yield on short-term 2-year traded 2 basis points lower at 1.062 percent by 03:45GMT.

US equities entered a consolidation phase after the initial optimism from the US-Mexico deal looks to be losing steam. Meanwhile, markets also reassessed the expectations of a July Fed rate cut after the steady US PPI data. Final demand prices rose by 0.1 percent m/m, in line with market expectations; however, annual readings edged down to 1.8 percent y/y in May from 2.2 percent in April, OCBC Treasury Research reported.

The deceleration of year-on-year readings was mainly due to falling gasoline prices and food prices. Core PPI increased by 0.2 percent m/m and 2.3 percent y/y, supported by rising service costs. This may support the rebound of the PCE. Markets will closely watch for the US CPI data due today, the report added.

Meanwhile, the S&P/ASX 200 index remained flat at 6,564.5 by 03:50GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -128.12 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex