Australia 10Y Bond Yield Hits 15-year High

Australia’s 10-year government bond yield rose toward 5.4%, hitting a fresh 15-year high as soaring oil prices heightened inflation concerns and fueled expectations of further global policy tightening. Global bond markets remained under intense pressure as escalating Middle East tensions raised concerns over disruptions to energy supplies. The resulting oil shock has strengthened expectations for further RBA tightening, with markets now implying an 85% chance of a 25bp hike to 4.60% on September 29. Governor Bullock is scheduled to appear before Parliament and is expected to reiterate that rates may need to rise further to bring inflation under control. Meanwhile, the US Federal Reserve is also expected to keep policy tighter this week and potentially move again by December, adding pressure on yields. Long-end yields were also pushed higher by surging corporate debt issuance from AI companies, which has constrained capital allocation by primary dealers and other financial institutions.

Australia 10 Year Government Bond Yield increased to 5.40%, the highest since May 2011. Over the past 4 weeks, Australia 10Y Bond Yield gained 36.30 basis points, and in the last 12 months, it increased 116.00 basis points.

Australia’s 10-year government bond yield jumped above 5.3%, its highest level since May 2011, tracking a surge in US Treasury yields as escalating Middle East tensions pushed oil prices higher and stoked inflation concerns. The US bond-market selloff accelerated after the Treasury purchased fewer bonds than expected in its first expanded buyback operation. This added pressure from spiking oil prices as intensifying strikes between the US and Iran threatened to worsen disruptions to energy supplies from the Gulf, raising inflation risks and expectations that central banks may keep monetary policy tighter for longer. The oil shock ramped up bets on a fourth rate hike this year by the Reserve Bank of Australia, with markets now pricing in a 90% chance of a quarter-point increase at the upcoming meeting this month. Markets also expect the cash rate to reach 4.85% by early next year, its highest level since 2008. Focus now turns to August jobs data for further clues on the policy outlook.