| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.273 | 3.238 | 0.035 |
| Australian 10-year bond (%) | 4.152 | 4.123 | 0.029 |
| Australian 30-year bond (%) | 4.836 | 4.81 | 0.026 |
| United States 2-year bond (%) | 3.793 | 3.707 | 0.086 |
| United States 10-year bond (%) | 4.275 | 4.203 | 0.072 |
| United States 30-year bond (%) | 4.8021 | 4.7487 | 0.0534 |
Overview of the Australian Bond Market
Australian government bond yields ticked higher on Tuesday, with the 10-year yield rising 7 basis points to 4.19%, reflecting cautious optimism ahead of the RBA’s July meeting. The 2-year yield increased 6 basis points to 3.26%, while the 15-year yield climbed 6 basis points to 4.52%.
The uptick follows Monday’s softer-than-expected May CPI data, reinforcing market expectations of a July rate cut from 3.85% to 3.60%, now priced at a 94% probability. Markets anticipate at least four cuts (100 basis points) by mid-2026, with three likely before Christmas. The Australian dollar held steady at 0.6586 US cents, supported by de-escalating Middle East tensions.
Credit spreads continued to tighten, with 5-year major bank senior spreads narrowing to +80 basis points and Tier 2 spreads at +160 basis points, driven by low supply expectations ahead of the financial year-end. Global yields remained subdued, with focus on Powell’s testimony and potential RBA easing.
Overview of the US Bond Market
US Treasury yields rose modestly on Tuesday, with the benchmark 10-year note yielding 4.28%, up 4 basis points from Monday’s 4.24%. The 30-year bond climbed to 4.80%, up 16 basis points, reflecting cautious investor sentiment amid shifting rate cut expectations.
The yield curve steepened slightly, with the 2-year note at 3.78%, up 15 basis points, and the 5-year at 3.86%, up 14 basis points. The moves followed Federal Reserve Vice Chair Bowman’s comments supporting a possible July rate cut, though Chair Powell’s recent testimony emphasized a measured approach due to tariff-related inflation risks. Money markets now price in a 60% chance of a July cut, up from 50% last week, with two cuts expected by year-end.
President Trump’s ongoing review of Powell’s successor, with his term ending in May 2026, added uncertainty, though no immediate changes are expected. Treasury Secretary Scott Bessent hinted at potential adjustments to bank capital requirements, which could boost Treasury demand and support yields.
