Standard & Poor’s decision to strip Western Australia state of its AAA credit rating may act as a warning to Prime Minister Tony Abbott as he assumes stewardship of a national budget that’s been in deficit for five years.
Treasury 10-year note yields rose to 3 percent for the first time in two years as a strengthening U.S. employment market increases speculation the Federal Reserve will announce plans to slow its bond-buying program this month.
Treasuries fell, halting a four-day gain, before U.S. data forecast to show applications for unemployment benefits declined, bolstering the case for the Federal Reserve to pare stimulus as early as next month.
Australian government bonds will outperform U.S. peers in the coming eight months, shrinking the yield premium offered by benchmark notes to the least since 2006, as growth prospects for the two nations diverge.
Australian government bonds suffered their biggest weekly rout since 2001 as the Federal Reserve signaled it may begin tapering stimulus this year, reducing the appeal of the South Pacific nation’s assets.
The Australian dollar traded near a five-week low as concern global growth may falter and speculation the central bank will temper the pace of future interest-rate increases damped demand for riskier assets.