Australia 10Y Yield Rises Over 2-Week High

Australia’s 10-year government bond yield rose above 4.9%, reaching more than a two-week high as rising Middle East tensions and a fragile US-Iran peace deal fueled inflation concerns. Iran launched multiple missile waves toward Israel over the weekend as a warning against further military actions in Lebanon, casting doubt on a fragile ceasefire as peace talks remain stalled. The prolonged conflict and the continued near-closure of the Strait of Hormuz have disrupted energy supplies from the Persian Gulf, pushing oil prices higher and intensifying global inflation concerns. In Australia, RBA Governor Michele Bullock reiterated last week that the central bank remains firmly focused on bringing inflation down, following three rate hikes earlier this year that lifted the cash rate to 4.35%. She also noted that inflation remains too elevated, stressing that the board will take whatever measures it deems necessary to fulfill its mandate of achieving price stability and full employment.

Australia’s 10-year government bond yield traded above 4.9%, but stayed near two-week lows as markets continued to assess diplomatic efforts in the Middle East, while the Reserve Bank signaled a wait-and-see approach. The central bank has already delivered three hikes this year, and Governor Michele Bullock said the rate increases are starting to filter through the economy. However, she reiterated that inflation remains elevated and policymakers will remain alert to persistent price pressures. Markets expect the RBA to stand pat in June, with about a 50% odds of another hike in August and full pricing for a move by December. Investors now await further clues on the policy outlook, with Deputy Governor Andrew Hauser due to speak later today. Meanwhile, ceasefire negotiations in the Middle East conflict appeared uncertain, with conflicting signals from Washington and Tehran. Prospects are further complicated as Iran-backed Hezbollah rejected a US-brokered truce proposal in Lebanon.

Australia’s 10-year government bond yield traded around 4.9%, hovering near eight-week lows as softer-than-expected GDP data reinforced bets of fewer rate hikes. The economy grew by just 0.3% in Q1, below expectations of 0.5% and down from 0.9% previously, while annual growth of 2.5% also missed forecasts, reinforcing signs that higher interest rates are cooling demand. The softer readings feed into the Reserve Bank’s June 15–16 policy meeting, where officials will assess whether policy is sufficiently restrictive to bring inflation back to target after three rate hikes this year. This comes against a backdrop of geopolitical tensions in the Middle East, which have pushed up global energy costs and fueled inflation risks. RBA Governor Bullock set to appear before lawmakers later today and Deputy Governor Hauser scheduled to speak on Friday will offer further clues on the policy outlook. Markets have ruled out another rate hike this month, but remain evenly split for a move in August.