Australia 10-Year Yield Steady at 3-Week Highs

Australia’s 10-year government bond yield hovered below 4.8%, trading near fifteen-week lows as global oil prices declined on optimism over the reopening of the Strait of Hormuz. An interim deal between the US and Iran to end the Middle East war allowed oil tankers to resume passage through the key waterway, helping ease inflation concerns and reduce pressure on central banks to maintain restrictive policy. Meanwhile, markets increasingly suspect the Reserve Bank of Australia has concluded its tightening cycle after leaving the cash rate unchanged this week, with the odds of another hike this year falling to around 50% and only a 25% chance priced in for August. While Governor Michele Bullock maintained that further tightening remains possible if inflation persists, markets expect it would take a sharply higher second-quarter inflation reading to trigger another move. Attention now turns to the upcoming May CPI report due next week, which will be pivotal for the policy outlook.

Australia’s 10-year government bond yield traded around 4.8%, staying near multi-month lows after the Reserve Bank kept rates unchanged for the first time this year. In a unanimous vote, the central bank held the cash rate at 4.35%, citing signs that three rate hikes earlier this year are beginning to filter through the economy. While policymakers reiterated that inflation remains elevated, a recent series of softer economic data gave the RBA room to pause and assess the impact of past tightening. Markets now await Governor Michele Bullock’s press conference later today for clues on whether policymakers are leaning toward an extended pause or maintaining a tightening bias. Three of Australia’s four largest banks expect the RBA to keep rates unchanged for the remainder of 2026, with some forecasting rate cuts next year. Elsewhere, global inflation concerns eased as oil prices fell sharply following a tentative US-Iran peace deal that could lead to the reopening of the Strait of Hormuz.

Australia’s 10-year government bond yield dropped below 4.8%, hitting over a three-month low after a US–Iran interim peace deal eased global inflation concerns, while markets widely expect the Reserve Bank will hold policy rates this week. A series of softer economic releases, from GDP to housing prices, reinforced signs that the central bank’s three rate hikes earlier this year began to filter through the economy. Market pricing now ruled out a move at the June meeting, while bets for an August rate hike have eased sharply to around 35%, down from more than 80% a month ago. The May CPI report due on June 24, will be pivotal as policymakers look for clearer evidence that price pressures remain strong. Meanwhile, the US and Iran reportedly reached a peace agreement, sending oil prices lower, easing inflation and rate-hike expectations. The deal, set to be signed in Switzerland on June 19, includes sanctions relief for Iran, lifting blockades, and dismantling Tehran’s nuclear program.