Australia 10Y Yield Hits 2-Year High

Australia’s 10-year government bond yield fell below 4.8%, trading near fifteen-week lows as signs of progress in ongoing US-Iran peace talks helped ease inflation concerns, while caution built ahead of domestic inflation and jobs data this week that could indicate whether the Reserve Bank has finished raising rates. Headline inflation is expected to pick up to 4.4% in May from 4.2% from a month earlier, while core measure likely edged up to 3.5% from 3.4%, both well above the central bank’s target. Deputy Governor Andrew Hauser is expected to speak about the inflation outlook after the CPI release. For the jobs data, a rise of 25,000 net jobs for May is expected, while the unemployment rate likely fell to 4.4% after hitting a 4 1/2 -year high of 4.5% last month. Meanwhile, the US and Iran recently agreed on a 60-day roadmap toward a final deal, and now Washington issued Tehran a license to sell oil on international markets, fueling expectations of a faster recovery in global supply.

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.