| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.811 | 3.79 | 0.010 |
| Australian 10-year bond (%) | 4.433 | 4.385 | 0.013 |
| Australian 30-year bond (%) | 4.961 | 4.904 | -0.007 |
| United States 2-year bond (%) | 4.238 | 4.197 | 0.041 |
| United States 10-year bond (%) | 4.567 | 4.512 | 0.055 |
| United States 30-year bond (%) | 4.812 | 4.759 | 0.053 |
* Implied yields from March 2025 futures. As at 31 January.
LOCAL BOND MARKETS
Today, the Australian bond market saw some notable movements:
– Yields on government bonds fell across various maturities. The 2-year yield dropped by 6 basis points to 3.77%, the 5-year yield decreased by 5 basis points to 3.95%, and the 10-year yield fell by 5 basis points to 4.37%.
– Longer-term bonds also saw declines, with the 15-year yield decreasing by 5 basis points to 4.57%.
– The 30-year bond yield remained relatively stable, with a slight decrease of 2 basis points.
Cash rate expectations in Australia have been a focal point for market participants and economists alike. Following the latest inflation data, which showed a softer-than-expected rise in December, there is a growing consensus that the Reserve Bank of Australia (RBA) may cut interest rates sooner than previously anticipated.
Market indicators, such as the ASX 30 Day Interbank Cash Rate Futures, suggest a high probability of a rate cut at the RBA’s next meeting in February. Major banks, including Commonwealth Bank, ANZ, and Westpac, have revised their forecasts to predict a 0.25 percentage point cut, bringing the cash rate down to 4.1%1. NAB, while initially forecasting a cut in May, is now reviewing its prediction in light of recent data.
US MARKETS
US Treasury bond yields rose moderately across the curve. Economic reports released on the day included figures for December durable goods, The Conference Board’s January consumer sentiment survey and the Richmond Fed’s January activity index.
The next FOMC meeting ends on 29 January. February federal funds futures implied an average cash rate of 4.325% for the month and thus a tiny probability of a 25bp rate cut at the meeting. December contracts implied 3.845%, 48bps less than the current federal funds effective rate.
