Australia: Treasury Bond Yields Set for Biggest Weekly Fall in Decade

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  • Aussie bond buyers hold the reins as investors await RBA Governor Lowe’s speech.
  • 10-year coupons pull back from eight-year highs and break a four-week uptrend.
  • The 3-year Treasury yield reverses from highs in late 2011, on track for biggest weekly loss in 11 years.
  • Australian data and the RBA’s assertive stance fail to support bond buying amid recession fears.

Australian bond markets follow global signals to tempt bulls as prices rise economic slowdown fears. Australian bond buyers are also hopeful with comments from Reserve Bank of Australia (RBA) Governor Philip Lowe due out on Friday at 11:30 GMT.

Having said that, Australian 10-year Treasury bond yields extend pullback from highest levels since 2014despite daily gains of 1.0% around 3.71%.

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Even more importart, the 3-year bond sees the biggest weekly loss since 2011 with a drop of more than 11% to 3.31% at the time of writing.

“Australian bonds have soared this month after the RBA raised rates more than economists expected and Governor Philip Lowe said policymakers would do what was necessary to reduce inflation,” notes Bloomberg. to justify movements in the bond market.

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However, it should be noted that global recession fears are strong enough to weigh on market sentiment and in Treasury yields.

Risk aversion in Australia overrides upbeat PMIs from the country, as well as softer activity figures from the US, not to mention recently upbeat data from China. Having said that, Preliminary S&P Global PMI readings for Australia for June were mixed, as the manufacturing and services PMIs beat forecasts and market forecasts, but the composite PMI came in below previous readings. Manufacturing PMI rose to 55.8 vs. 54.7 forecast and 55.7 prior, while S&P Global Services PMI beat market consensus 49.1 to 52.6 vs. 53.2 prior. It is worth noting that the Composite PMI fell from 52.9 to 52.6 in June.

It is worth noting that RBA Governor Lowe is likely to reiterate his hawkish bias, especially after recent upbeat Australian PMIs, which could in turn favor Aussie bond buyers and weigh on yields. However, comments about the economic slowdown could hurt moves.

Source: Fx Street

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