Australian bonds waver as markets remain muted in the run-up to Christmas holidays

The Australian government bonds were drifting between small gains and losses in quiet trading on Friday ahead of the Christmas holiday.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 2.86 percent, the yield on 15-year note dipped 1/2 basis point to 3.33 percent and the yield on short-term 2-year stood flat at 1.92 percent by 05:20 GMT.

The Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.

Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.

In terms of recent data, Australia’s November employment jumped to 39,100, higher than the previous print of 15,200. This beats market expectations for an increase of 20,000. However, the unemployment rate rose to 5.7 percent in November, from down 5.6 percent in October.

Moreover, Australia has more than 50 percent chance of losing its AAA sovereign credit rating next week, following the Federal Government's half-yearly economic update, which could see lending costs rise.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded flat at 5,489 by 05:20 GMT. While at 05:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral -38.15 (lower than -75 represents a bearish trend).