Interest Rate & Market Commentary for Week Ending 4th July 2025
Weekly Overview
The major Australian stock indices edged higher over the week ending July 4, 2025, with the S&P/ASX 200 marking its eighth record high of the year, gaining a modest 0.08% to close at 8,603.0. The All Ordinaries rose 0.09% to 8,841.9, while smaller indices like the Small Ords (+0.10% to 3,264.1), All Tech (+0.28% to 4,055.5), and Emerging Companies (+0.47% to 2,332.0) also advanced. The gains came despite a volatile session on Friday, buoyed by a resources rally earlier in the week, though US markets remained closed for Independence Day.
Australian government bond yields saw slight increases, with the 10-year yield rising 1 basis point to 4.19%. The market digested a softer May CPI print, reinforcing expectations of a July rate cut, while global yields remained muted with the US market shuttered. Iron ore prices stabilised, supporting materials, though oil prices dipped to around $67 per barrel amid seasonal demand concerns and a steady Middle East ceasefire.
Investors were lifted by progress in trade negotiations ahead of the July 9 reciprocal tariff deadline, with Trump’s administration extending talks with key partners. However, uncertainty persists as the RBA’s July 7–8 meeting and Tuesday’s US jobs report loom. At the week’s midpoint, the ASX 200 Volatility Index held steady at 14.2, down from a year-to-date high of 18.9 in April, signalling reduced short-term market jitters.
Inflation data released earlier this week showed Australia’s trimmed mean CPI at 2.4% year-on-year, below the prior 2.8%, bolstering rate cut optimism. A weekly labour market update due Tuesday will reveal if June’s job growth, estimated at 100,000, held steady, following May’s 120,000 gain. The Australian dollar remained stable at 0.6586 US cents, supported by a quiet global backdrop.
Overview of the US Equities Market
With US markets closed on Friday for Independence Day, the week’s equity performance reflected Thursday’s gains, with the S&P 500 up 0.83% to 6,279.35 and the Nasdaq Composite rising 1.02% to 20,601.10. The week’s advance, estimated at around 2%, was fueled by tech strength and trade negotiation optimism, though the Dow lagged, remaining below its peak.
Active trading highlighted Lixte Biotechnology Holdings Inc. (LIXT), up 40.10% to $2.83 on 64.1 million shares, and Bit Digital Inc. (BTBT), gaining 11.79% to $2.94 on 77.3 million shares, driven by biotech and crypto momentum. NVIDIA Corp. (NVDA) added 1.33% to $159.34 on 143.7 million shares, reinforcing tech leadership, while Lucid Group Inc. (LCID) rose 5.37% to $2.16 on 211.4 million shares, buoyed by EV interest.
Trade talks ahead of the July 9 deadline lifted sentiment, though Canada talks collapsed over dairy tariffs. With earnings season nearing, the focus shifts to Tuesday’s reopening and Friday’s holiday-delayed jobs report, expected to show 100,000 jobs added in June, down from May’s 139,000. The Cboe Volatility Index, steady at 16.3 pre-holiday, suggests muted short-term risks.
Overview of the US Treasuries Market
US Treasury yields held steady in pre-market trading on Friday, closed for Independence Day, with the 10-year note at 4.35% and the 30-year at 4.86% from Thursday’s close. The week saw a slight uptick, with the 2-year yield at 3.88% and the 5-year at 3.94%, reflecting cautious sentiment amid rate cut speculation.
The yield curve steepened, supported by a 65% chance of a July rate cut, up from 60% last week, driven by Fed Vice Chair Bowman’s dovish stance versus Chair Powell’s tariff caution. Trump’s potential Fed chief replacement and Bessent’s bank capital relief proposal added tailwinds. With markets quiet, focus turns to Tuesday’s data, including the jobs report, which could shift yield trends.
Overview of the Australian Equities Market
Australian equities delivered a mixed yet record-breaking week, with the S&P/ASX 200 closing at 8,603.0 on Friday, up 0.08% for the day and marking its eighth record high of 2025. The recovery from a -0.63% midday dip on Thursday, driven by a resources rally, underscored shifting dynamics, though Friday’s session saw a pullback in materials.
The ASX 200 Materials Index fell 0.97% on Friday after a 4.9% surge over the prior two sessions, slipping below its 200-day moving average. BHP dropped 1.2%, South32 fell 0.9%, and Pilbara Minerals eased 1.5%, reflecting profit-taking after strong gains. Financials edged up 0.14%, with ANZ gaining 3.84% weekly, Westpac down 0.80%, and NAB off 0.28%, though Commonwealth Bank slumped 3.97% to a two-week low—its worst weekly performance since early March.
Breadth was solid, with 61% of ASX 200 constituents closing higher, and VanEck’s Australian Equal-weight ETF outperforming by 10 basis points. Defensive sectors like Real Estate, Health Care, and Staples shone, while riskier stocks like Zip (-0.9%) and Droneshield (-4.8%) traded erratically. Recent IPOs, the Virgin (-2.6%) and Gemlife (-5.7%,) also weakened. With the RBA’s rate decision and US data on the horizon, the market’s choppy record-high performance suggests caution.
Overview of the Australian Government Bond Market
Australian government bond yields posted modest gains for the week ending July 4, 2025, with the 10-year yield rising 1 basis point to 4.19% on Friday. The 2-year yield climbed 2 basis points to 3.27%, the 5-year increased 1 basis point to 3.59%, and the 15-year held steady at 4.52%, reflecting a cautious market awaiting the RBA’s July 7–8 meeting.
The uptick followed a softer May CPI print, solidifying expectations of a July rate cut from 3.85% to 3.60%, priced at a 94% probability, with four cuts (100 basis points) projected by mid-2026. The Australian dollar stayed firm at 0.6586 US cents, supported by stable global yields amid the US holiday closure.
Credit spreads tightened, with 5-year major bank senior spreads at +80 basis points and Tier 2 spreads at +160 basis points, driven by low supply ahead of EOFY. The market remained quiet, with focus on the RBA’s decision and Tuesday’s US reopening, as global bond movements were subdued with limited macro data.
Market Summary Table
| Name | Week Close | Week Change | Week High | Week Low |
|---|---|---|---|---|
| Cash Rate% | 4.1 | |||
| 3m BBSW % | 3.583 | -0.037 | 3.6037 | 3.583 |
| Aust 3y Bond %* | 3.304 | 0.046 | 3.289 | 3.238 |
| Aust 10y Bond %* | 4.193 | 0.047 | 4.185 | 4.123 |
| Aust 30y Bond %* | 4.863 | 0.035 | 4.862 | 4.81 |
| US 2y Bond % | 3.882 | 0.132 | 3.882 | 3.721 |
| US 10y Bond % | 4.34 | 0.067 | 4.340 | 4.226 |
| US 30y Bond % | 4.856 | 0.0319 | 4.856 | 4.775 |
| iTraxx | 67 | 0 | 71 | 67 |
| $1AUD/US¢ | 65.5 | 0.42 | 65.87 | 65.45 |
Looking Ahead: Major Economic Releases for the Week Ending 11th July
For the week ending July 11, 2025, Australia’s RBA Cash Rate decision is a key focus, with expectations of a slight reduction to 3.6% from 3.85%, signalling potential monetary easing to support economic growth amid global uncertainties. In the U.S., the Overall Comprehensive Risk Index, though lacking a consensus forecast, will provide insights into systemic economic risks following a prior reading of 7.92.
| **Date** | **Country** | **Release** | **Consensus** | **Prior** |
|---|---|---|---|---|
| Tuesday, 08/07 | Australia | RBA Cash Rate | 3.60% | 3.85% |
| Wednesday, 09/07 | United States | Overall Comprehensive Risk | n/a | 7.92 |
| Thursday, 10/07 | United States | Initial Jobless Claims | 235K | 233K |
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