Australia Treasury bond yields brace for the biggest weekly fall in a decade

• Aussie bond buyers keep reins as traders await RBA’s Lowe.
• 10-year coupons retreat from the highest in eight years to snap four-week uptrend.
• 3-year Treasury yield reverse from late 2011 highs, on the way to posting biggest weekly loss in 11 years.
• Aussie data, hawkish RBA fail to underpin bond-buying amid recession fears.

Australian bond markets track global cues to tease bulls as fears of economic slowdown escalate. Also keeping the Aussie bond buyers hopeful is the likely hawkish comments from Reserve Bank of Australia (RBA) Governor Philip Lowe, up for release at 11:30 GMT on Friday.

That said, Australia’s 10-year Treasury bond yields extend pullback from the highest levels since 2014 despite the 1.0% daily gains around 3.71%.

More importantly, the 3-year counterpart eyes the biggest weekly loss since 2011 with over 11% fall to 3.31% by the press time.

“Australia’s bonds have whipsawed this month after the RBA raised rates more than economists forecast and Governor Philip Lowe said policymakers would do what’s necessary to bring inflation down,” said Bloomberg in justification of the bond market moves.

It’s worth noting, however, that the fears of the global recession are stronger enough to weigh on the market sentiment and the Treasury yields of late.

The risk-aversion in Australia ignores upbeat PMIs at home, as well as the softer US activity numbers, not to forget China’s recently upbeat traffic data. That said, the preliminary readings of Australia’s S&P Global PMIs for June came in mixed as the Manufacturing and Services PMIs rose past market forecasts and priors but the Composite PMI eased below the previous readouts. The Manufacturing PMI rose to 55.8 versus 54.7 expected and 55.7 prior whereas the S&P Global Services PMI rose past 49.1 market consensus to 52.6, versus 53.2 previous readings. It should be noted that the Composite PMI eased below 52.9 to 52.6 in June.

It’s worth noting that RBA’s Lowe is likely to reiterate his hawkish bias, especially after the recently upbeat Aussie PMIs, which in turn could favor the Aussie bond buyers and weigh on the yields. Though, comments over economic slowdown may be detrimental to the moves.

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