The Australian government bonds continue to rally on Wednesday as investors poured into safe-haven assets amid deepening global economic growth fears, thanks in part to the UK Brexit vote.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price fell 9 basis points to 1.848 percent and the yield on short-term 2-year note also dipped 6 basis points to 1.532 percent by 05:30 GMT.
In the global debt market, the 10-year Treasury note yield fell to record low of 1.34 percent, German 10-year bund yield dipped to -0.186 percent, UK gilt yield tumbled to 0.771 percent and the 10-year JGB slid to a record low of -0.269 percent.
On Tuesday, the Reserve Bank has left rates on hold at their current all-time low at 1.75 percent, as the central bank waits for a crucial update on inflation due out on July 27. The RBA in its monetary policy statement mentioned that the global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded improved conditions over the past year, but conditions have become more difficult for a number of emerging market economies. China's growth rate has moderated further, though recent actions by Chinese policymakers are supporting the near-term outlook.
They further added that the financial markets have been volatile recently as investors have re-priced assets after the UK referendum. But most markets have continued to function effectively. Funding costs for high-quality borrowers remain low and, globally, monetary policy remains remarkably accommodative. Any effects of the referendum outcome on global economic activity remain to be seen and, outside the effects on the UK economy itself, may be hard to discern.
Lastly, they concluded that inflation has been quite low and given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time. Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend and credit growth has been moderate. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
According to an Australian press, the Coalition party is gaining ground in several undecided seats as postal vote counting continues. Meanwhile Malcolm Turnbull looks likely to fall just short of forming a majority government (76 seats are needed to win a majority). Based on current trends, the Coalition party looks likely to hold about 74 or 75 seats.
However, the Coalition party still has a chance of winning the 76 seats needed to form a majority government if postal vote counting falls strongly its way. If the Coalition narrowly misses forming majority government, rural Queensland independent Bob Katter would be expected to help it form a working majority in the lower house.
Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading down 0.33 percent, or 17 points, at 5,150.5 by 05:30 GMT.
The material has been provided by InstaForex Company – www.instaforex.com