Australian bonds trade mixed ahead of major central banks’ monetary policy decisions

Australian government bonds traded mixed on Monday as markets await major central banks’ monetary policy decisions scheduled this week, where the Bank of Japan is speculated to start unwinding its quantitative easing and the Bank of England is expected to hike its interest rate, while the Federal Reserve is anticipated to keep policy steady.

The yield on Australia’s benchmark 10-year Note, which moves inversely to its price, fell 1 basis point to 2.649 percent, the yield on the long-term 30-year Note also dipped 1 basis point to 3.120 percent and the yield on short-term 2-year traded flat at 2.017 percent by 03:30 GMT.

The OCBC Bank in its daily Treasury outlook noted to watch the BOJ tomorrow (where policy settings are likely to remain static, albeit the recently intense market speculation of a yield curve control policy tweak may either evoke a strong market reaction or be left disappointed. Watch the BOJ outlook report and Kuroda’s press conference for more light on future intentions), FOMC on August 2 (likely unchanged at 1.75 percent, but statement may set the stage for the anticipated September hike), and the BoE rate decision on Thursday (likely to be a dovish hike of 25bps to 0.75 percent that has already been discounted by the market, with Cunliffe a potential dissenter).

On the other hand, it is worth noting that the RBA next meeting is scheduled for August 7, where the board members are expected to keep its interest rate unchanged at 1.50 percent.

In the United States, Treasuries remained little changed ahead of FOMC policy decision scheduled for Wednesday. The U.S. 10-year Treasury yield remained range bound at 2.960 percent.

“US bond yields fell after the US GDP and PCE inflation numbers came in slightly below consensus expectations. The yield on the 10-year US government bond fell from 2.97 percent to 2.95 percent. The yield on the 2-year US government bond fell from 2.68 percent to 2.67 percent,” noted St.George Bank in its morning report.

Meanwhile, the S&P/ASX 200 index traded 0.27 percent lower at 6,209.5 by 03:30 GMT, while at 03:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at 1.72 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex