Australian short-term 2-year bond yields slump on dovish Statement of Monetary Policy

Australian short-term bonds yields slumped Friday after RBA signals rates on hold as growth drags. The central bank said weak wages growth will keep downward pressure on inflation over the next few years.

The short-term 2-year Treasury note yields, which is most sensitive to interest-rate moves, fell over 1 basis point to 1.186 percent, but the yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1 basis point to 2.623 percent, the yield on the long-term 30-year note up 1 basis point to 3.397 percent by 02:40 GMT.

The Reserve Bank of Australia has signalled it will likely keep the current historically low official interest rate unchanged as it waits for a slow return to healthy levels of inflation, wages and economic growth.

Australia's inflation rate is expected to rise more slowly than the RBA expected in August as low wage growth continues to depress spending and economic growth, the central bank said in its latest Statement on Monetary Policy (SOMP) on Friday.

In the United States, Treasuries saw a mixed performance overnight as modest buying in the short-end was contrasted by downward pressure further out the curve. Overall, the big news of the day was the Senate version of proposed tax reform, highlighted by a delay in the corporate tax rate cut to 20 percent (from 35 percent) until 2019.

Meanwhile, the S&P/ASX 200 index traded 0.20 percent higher at 6,020.5 by 02:40 GMT, while at 02:00GMT, the FxWirePro's Hourly AUD Strength Index remained neutral at -12.06 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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