Australia 10Y Yield Approaches 3-Month Low

Australia's 10-year government bond yield fell below 5%, hitting its lowest level in nearly three months as expectations that the Reserve Bank of Australia has reached the end of its tightening cycle boosted demand for government debt. Last week's 6–3 split decision to raise the cash rate to an 18-year high of 4.85%, coupled with the removal of its tightening bias, reinforced expectations that borrowing costs have peaked. Interest rate swaps now imply an 80% probability that rates have reached their peak, with around 30 basis points of easing priced in by the end of next year. Meanwhile, weaker domestic business and consumer confidence added to concerns about economic growth amid elevated cost pressures and higher interest rates. Westpac's consumer sentiment index fell 2.7% to 78.2 in November, its lowest level in four years, while business confidence dropped to a six-year low in October, according to the NAB business survey.

Australia's 10-year government bond yield held around 5.0%, near its lowest level since late August as global bond markets rallied on increased safe-haven demand following a selloff in technology stocks. Investor concerns mounted after the Democrats’ sweeping victory in the US midterm elections raised fears that tighter regulations could slow AI investment, prompting a rally in US Treasuries that spilled over into the Australian bond market. The decline was reinforced by the Reserve Bank of Australia's November 3 decision, as the quarter-point hike to 4.85% was accompanied by a closely divided 6–3 vote, boosting expectations that rates had peaked. However, top RBA officials continued to flag persistent inflationary pressures. Assistant Governor Sarah Hunter said the AI investment boom could add to near-term inflation. Earlier, Deputy Governor Hauser also warned that weakening public confidence in the RBA's ability to control inflation could require more aggressive rate hikes.

Australia’s 10-year government bond yield fell to around 5.0%, hitting a ten-week low as global equities and bonds rallied, while the Reserve Bank of Australia’s less hawkish policy guidance dampened expectations for further interest rate hikes. Although the central bank raised its cash rate by 25 bps to 4.85% on November 3, the split 6–3 decision, with three policymakers favoring no change, and the removal of explicit language on further tightening pointed to a possible pause in December. Attention now turns to RBA Deputy Governor Andrew Hauser, who is due to speak later today on trust in the transmission of monetary policy and may face questions about the impact of lower oil prices on the policy outlook. Elsewhere, Democratic victories in the US midterm elections, which gave the party control of both chambers of Congress, fueled hopes of progress toward ending the US-Iran conflict. This triggered a sharp decline in oil prices and eased concerns over energy-driven inflation.