Australian Treasury yields brace for biggest weekly decline in a decade

  • Australian bond buyers keep the reins as traders wait for Lowe from the RBA.
  • 10-year coupons pull back from eight-year high to break four-week uptrend.
  • The yield on 3-year Treasury bills has reversed from late-2011 highs, on track to post the biggest weekly loss in 11 years.
  • Australian data and the hawkish RBA fail to support bond buying amid recession fears.

Australian bond markets are following global signals to tease bulls as fears of an economic slowdown intensify. Probably hawkish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe, to be released at 11:30 GMT on Friday, also keep Australian bond buyers hopeful.

That said, Australian 10-year Treasury bond yields continue their pullback from the highest levels since 2014 despite daily gains of 1.0% around 3.71%.

More importantly, the 3-year counterpart is eyeing the biggest weekly loss since 2011 with a drop of more than 11% to 3.31% at press time.

“Australian bonds fell this month after the RBA raised rates more than economists expected and Governor Philip Lowe said policymakers would do what is needed to bring inflation down,” Bloomberg said. to justify movements in the bond market.

It should be noted, however, that global recession fears are strong enough to weigh on market sentiment and Treasury yields as of late.

Australia’s risk aversion ignores upbeat PMIs in the country, as well as weaker US activity numbers, not to mention recently upbeat traffic data from China. That said, the Australian S&P Global PMI’s preliminary readings for June were mixed, as the Manufacturing and Services PMIs beat forecasts and market precedents, but the Composite PMI fell below previous readings. The manufacturing PMI rose to 55.8 from 54.7 expected and 55.7 previously, while the S&P Global Services PMI rose above market consensus 49.1 to 52.6 from 53.2 previous reading. It should be noted that the composite PMI fell below 52.9 to 52.6 in June.

It should be noted that the RBA’s Lowe is likely to reiterate its hawkish bias, especially after the recently upbeat Australian PMIs, which could in turn favor Australian bond buyers and weigh on yields. However, comments about the economic downturn can be detrimental to movements.

Also read: AUD/USD climbs back to 0.6900 amid corrective pullback ahead of RBA’s Lowe’s

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