Australian bonds tad lower on hopes of better August employment report; 10-year yield hovers near 2-week high

Australian bonds traded a little lower on Wednesday as market hopes better-than-expected August employment report. Investors remained side-lined amid a muted trading day that is scheduled to witness data of little economic significance. However, traders will eye the August employment report and any major developments in global trade policies.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, rose ½ basis point to 2.591 percent, the yield on the long-term 30-year bond also climbed 1/2 basis point to 3.088 percent but the yield on short-term 2-year down 1/2 basis point to 2.011 percent by 03:40GMT.

 “Markets await more trade developments. On NAFTA, a number of issues still need to be resolved, with Canadian Prime Minister Trudeau saying overnight that no deal is better than a bad deal. On Brexit, markets were undeterred overnight by (the) news that Mark Carney has agreed to extend his term as Governor at the Bank of England through to 2020, to provide stability to the UK economy,” noted ANZ in its Australia morning focus note.

“The US has made noise that it may impose tariffs on all imports from China – which China cannot reciprocate. However, China may look to take other retaliatory actions. Overnight reports suggested China will ask the WTO for permission to retaliate against the US, due to its failure to modify its anti-dumping regime. There were also reports that China is putting off accepting licence applications from American companies in financial services and other industries until Washington makes progress toward a settlement on trade.”

On the economic data front, Australia September Westpac-MI Consumer Sentiment fell by 3 percent to 100.5, down from was August’s 103.6.

In the United States, the Treasury yields were little changed and the US 10-year yields rose to 2.972 percent, but remained nearly flat compared to Tuesday’s close.

“The US 10-year treasury yield extended a three-week-old rise from 2.94-2.98 percent, and 2-year yields rose from 2.71- 2.75 percent - the highest since July 2008. Overnight drivers included strong US data and higher equity prices. Fed fund futures yields continued to price 100 percent chance of a hike on September 26 and a 75 percent chance of another in December,” noted Westpac.

Looking ahead, Australia August employment change is expected to come at 18.4K, better compared to -3.9K fall seen in July. At the same time, the unemployment rate is anticipated to remain steady at 5.3 percent.

Meanwhile, the S&P/ASX 200 index traded 0.23 percent higher at 6,175.5 by 03:50GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -36.37 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex