Australia 10Y Bond Yield Hits 15-year High

Australia’s 10-year government bond yield broke above 5.2%, reaching its highest level since July 2011, as surging oil prices fueled inflation concerns while stronger-than-expected economic growth reinforced expectations for an imminent interest rate hike. Australia’s economy expanded 0.4% quarter-on-quarter in Q2, beating forecasts for 0.3% growth, while annual growth accelerated to 2.1%, above expectations for 1.8%. The stronger figures suggested economic activity remains resilient despite the Reserve Bank's efforts to cool demand and curb persistent inflation. Markets raised the odds of a fourth rate hike at the September meeting after the GDP release to 57% from 48% previously, while a November hike is now more than fully priced in. The probability of another hike in Q1 2027 also rose to 82% from 62%. Meanwhile, escalating US-Iran tensions and the resulting rise in oil prices have also rekindled inflationary risks in major economies, pushing global bond yields higher.

Australia 10 Year Government Bond Yield increased to 5.19%, the highest since July 2011. Over the past 4 weeks, Australia 10Y Bond Yield gained 21.40 basis points, and in the last 12 months, it increased 83.20 basis points.

The yield on the 10-year Australian Government Bond surged to over 5.17% in September, the highest since 2011, and tracking the rise in global bond yields on expectations of higher interest rates by major central banks. The return of strikes between the US and Iran added to pessimism on energy supply from the Middle East and rekindled pro-inflationary risks in major economies. This magnified the impact of an overshot domestic inflation print in July, when headline inflation rose to 3.6%, ahead of expectations of 3.3%. Markets increased exposure to hedges against a incoming rate hike by the RBA after minutes from the central bank's last meeting reflected growing concerns over price growth. Global inflation also raised bets on hikes by the Fed and BoJ this year. On top of that, record corporate debt issuance, including Australian dollar offerings by Alphabet, also lifted yields.