Australia 10Y Yield Eases from Multi-Decade Highs

Australia’s 10-year government bond yield eased to around 4.95%, retreating from multi-decade highs as optimism over a potential Middle East peace deal helped temper global inflation concerns, even as a tight domestic labor market kept hawkish expectations in place. The jobless rate held steady at 4.3% in March, while employment rose by 17.9 thousand, driven entirely by full-time jobs, signaling resilient labor demand despite external shocks from the conflict. This followed remarks from Deputy Governor Andrew Hauser, who said inflation is still running above target and that there is limited confidence that current interest rates are sufficiently restrictive. Markets are now pricing in a potential third consecutive rate hike in May, which would lift the cash rate to 4.35%. Meanwhile, the US and Iran are considering extending their two-week ceasefire to allow more time for talks, even as the Strait of Hormuz remains effectively closed under a dual blockade.

Australia’s 10-year government bond yield fell below 5%, but stayed near multi-year highs as investors assessed renewed diplomatic signals between the US and Iran and the Reserve Bank of Australia’s latest policy remarks. Speaking at an event in New York, Deputy Governor Andrew Hauser said interest rates would need to rise to a level that brings inflation back to the 2%-3% target band. However, he noted that policymakers would need to monitor the economic impact of the Iran conflict. The odds of a rate hike next month edged up to 72% from 69% after his remarks, with markets now awaiting key labor market data this week for further policy cues. Meanwhile, Australian consumer confidence slumped sharply in April as surging fuel prices and another rate hike triggered the steepest decline since the pandemic. Elsewhere, oil prices fell as US and Iranian officials signaled willingness to extend negotiations toward a longer-term ceasefire after weekend talks failed to reach an agreement.

Australia’s 10-year government bond yield rose above 5%, approaching fresh mutil-decade highs as global inflation risks intensified amid renewed Middle East tensions. The move followed President Donald Trump’s order for a naval blockade of the Strait of Hormuz after failed weekend peace talks with Iran, intensifying fears of a prolonged disruption in global energy supply. The energy shock has reinforced expectations that central banks may delay rate cuts or maintain restrictive policy for longer, keeping global yields elevated. In Australia, the repricing comes amid already sticky inflation and uncertainty around the Reserve Bank’s policy path. Markets currently price in a 65% chance the RBA will hike in May and see rates near 4.65% by year-end. Traders now look to RBA Deputy Governor Hauser’s remarks due later today and labor market data this week for further cues on policy outlook.