Australia 10Y Yield Hits Fresh 7-week Low

Australia’s 10-year government bond yield rose toward 5.2%, climbing off a recent seven-week low after hotter-than-expected inflation data boosted expectations for a fifth rate hike this year. Monthly CPI rose 0.8% in September, the biggest increase in six months and above the expected 0.7%, while the annual pace jumped to 4.3% from 4.0% in August, also exceeding forecasts of 4.2% and hitting its highest since March. The monthly core inflation rose 0.3%, matching expectations, while the annual rate edged up to 3.6% from 3.5%, also in line with forecasts. The pickup pushed inflation further above the RBA’s 2–3% target range, boosting bets on a hike at the November 3 meeting. The data followed remarks from RBA Governor Michele Bullock earlier on Wednesday, when she warned that upside risks to inflation were materializing and price pressures would likely exceed the central bank’s August forecast. Traders raised the odds of a November hike to 88%, up from 60% before the inflation print.

Australia’s 10-year government bond yield fell below 5.2%, hitting a fresh seven-week low as investors braced for upcoming third quarter inflation figures. The report is due Wednesday, with core inflation expected to rise by a sharp 1.0%, keeping the annual rate at 3.6%, well above the Reserve Bank of Australia’s 2%–3% target range. A stronger reading could bolster the case for a fifth rate hike this year. RBA Governor Michele Bullock and other senior officials are also scheduled to appear before lawmakers as the data is released, putting them under pressure to respond to the latest inflation figures and their implications for the policy outlook. Markets imply a 66% chance of a quarter-point hike to 4.85% at the November 3 meeting, though the move is widely expected to be the peak of the cycle. Despite the hawkish rate outlook, volatility in equity markets and heightened geopolitical tensions in the Middle East sustained safe-haven demand for bonds, keeping yields subdued.

Australia’s 10-year government bond yield fell below 5.2%, hitting a seven-week low as a tech-led global equity selloff spurred demand for safe-haven assets. Concerns over the enormous capital requirements of AI development and the sustainability of heavy data centre investment fueled fears that a slowdown in spending could weigh on economic growth. This prompted a rally in US Treasuries that spilled over into the Australian bond market. Falling oil prices also helped ease concerns over renewed inflationary pressures amid a potential de-escalation of the US-Iran conflict. In Australia, the upcoming Q3 CPI report will take center stage this week. Core inflation is expected to rise by a sharp 1.0% quarter-on-quarter, keeping the annual rate at 3.6%. That would leave inflation well above the Reserve Bank of Australia’s 2%–3% target range and could bolster the case for a fifth rate hike this year. The central bank's top officials will be appearing before lawmakers as the data is released.