Australia 10Y Yield Hits Fresh 15-Year Peak

Australia’s 10-year government bond yield climbed toward 5.3%, hitting a fresh high since mid-2011 as surging oil prices heightened inflation concerns and strengthened expectations for further rate hikes. Brent crude held above $100 per barrel after Iran and the US launched their biggest wave of attacks on shipping since the war began, threatening to worsen disruptions to energy supplies from the Gulf. The fresh energy-driven inflation pressure sent global bond yields higher, with US Treasury yields reaching their highest levels since 2023 as a buyback program of longer-dated bonds also disappointed. Meanwhile, the oil shock has already fed into domestic consumer prices, which has increased bets of a fourth rate hike this year. Deputy Governor Hauser said the debate at the next meeting would focus on whether to raise interest rates, citing persistently high inflation and upside risks. Markets now price in a 77% chance of a quarter-point hike at the RBA’s upcoming meeting this month.

Australia’s 10-year government bond yield traded around 5.2%, near its highest level since mid-2011 as increasingly hawkish signals from the Reserve Bank continued to strengthened expectations for another rate hike this month. Deputy Governor Andrew Hauser said late Tuesday that the central bank will debate the case for higher rates at its September meeting, citing persistently high inflation and upside risks. Assistant Governor Sarah Hunter also said the RBA has little tolerance for stronger inflation and may need to raise rates for a fourth time this year. The central bank has already hike its cash rate three times in 2026 as surging oil prices linked to the Gulf conflict pushed inflation higher. Markets are now pricing 74% odds of a 25-bp hike at the September 29 meeting, while a November move is fully priced in. Meanwhile, escalating Middle East tensions pushed Brent crude toward $100 per barrel, raising inflationary risks in major economies and pushing global bond yields higher.

Australia’s 10-year government bond yield rose above 5.2%, hitting 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. The 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 are now pricing in a 66% chance of a quarter-point hike to 4.60%, up sharply from just 10% a couple of weeks ago, while the odds of a further increase to 4.85% have risen to 50%. The probability of another hike in Q1 2027 also rose to 82% from 62%. Meanwhile, ongoing tensions in the Middle East and the resulting rise in oil prices have rekindled inflationary risks in major economies, pushing global bond yields higher.