Summary:
For the week ending July 4, 2025, the Australian government bond market recorded modest gains, balancing domestic economic signals with global quietness due to the US holiday. The Bloomberg AusBond Composite 0+ Yr Index rose 0.07%, with bond prices ticking higher. The benchmark 10-year yield increased 1 basis point to 4.19%, while the 2-year yield rose 2 basis points to 3.27%. The 15-year yield held at 4.52%, and the 5-year yield edged up 1 basis point to 3.59%.
Swap rates also climbed, with the 3-year rate up 2 basis points to 3.235%, the 5-year up 2.13 basis points to 3.6325%, and the 10-year up 2.38 basis points to 4.093%, reflecting heightened expectations of RBA easing. The softer May CPI data, showing a trimmed mean of 2.4% year-on-year, continues to fuel a 94% probability of a July rate cut to 3.60%, with four cuts projected by mid-2026.
Exhibit 1: Australian 10-yr minus 3-yr Spread
Exhibit 2: US 10-yr minus 2-yr Spread
To learn more about yield curves and their predictive power, visit this article or this one.