8 September 2025

ClosePrevious CloseChange
Australian 3-year bond (%)3.433.447-0.017
Australian 10-year bond (%)4.2884.345-0.057
Australian 30-year bond (%)5.0315.093-0.062
United States 2-year bond (%)3.5013.561-0.06
United States 10-year bond (%)4.084.134-0.054
United States 30-year bond (%)4.76654.8392-0.0727

Overview of the Australian Bond Market

Australian government bond yields eased across the curve on September 8, 2025, as a pullback in long-dated yields followed weaker-than-expected US jobs data, cooling some of the recent spike amid broader market choppiness. The 2-year yield dipped 4 basis points to 3.36 per cent, the 5-year fell 6 basis points to 3.65 per cent, the 10-year declined 9 basis points to 4.25 per cent, and the 15-year dropped 10 basis points to 4.61 per cent, reflecting a flight to safety in fixed income after the ASX’s modest decline and ongoing September seasonality.

The move aligns with a natural retracement from elevated levels driven by prior yield surges and a post-rally pullback in equities, though corporate earnings from recent seasons indicate underlying resilience. Globally, US Treasury yields have similarly softened in response to Friday’s employment print, with futures implying a roughly 60 per cent chance of a 25 basis-point Federal Reserve cut in September, potentially spilling over to influence Reserve Bank of Australia expectations as inflation remains in focus. Bond traders are trimming positions ahead of key US data releases this week, including producer prices on Tuesday, core CPI and headline CPI on Wednesday—both forecast at 0.3 per cent month-over-month with year-over-year readings of 3.1 per cent and 2.9 per cent respectively—and initial jobless claims alongside University of Michigan sentiment on Thursday, which could clarify the pace of Fed easing and its ripple effects on the Aussie dollar and local borrowing costs.

With the RBA’s benchmark rate steady and domestic surveys like Tuesday’s Westpac and NAB releases poised to gauge sentiment amid trade war echoes and commodity softness, the bond market’s bearish tilt persists on bets that rates stay higher for longer if US resilience holds. Recent deals easing global tariff uncertainties have bolstered this view, though stretched valuations in equities underscore the need for diversification. In the cash market, net long positions in Australian bonds have held steady, but investors remain cautious as swap contracts price in modest easing potential by year-end, contingent on softer Chinese producer prices and US inflation prints not reigniting yield pressures.

Overview of the US Bond Market

Treasury markets extended their rally as bond yields fell further, driven by expectations that the Federal Reserve will soon begin a series of rate cuts. The move follows last week’s disappointing U.S. jobs report, which reinforced the view that the labor market is losing momentum. Investors now await Thursday’s August CPI release, expected to show headline inflation rising modestly to 2.9% while core remains steady at 3.1%. Shorter-term Treasury yields, which are most sensitive to Fed policy, have fallen sharply, with the two-year yield at 3.49%. The 10-year yield also declined, settling near 4.0%, as markets balanced the prospect of easing against concerns over sticky inflation and widening budget deficits.
Adding to the debate, economists anticipate significant downward revisions to historical payroll data. The Bureau of Labor Statistics’ preliminary benchmark revision, due Tuesday, could show employment through March was 800,000 to 1 million jobs lower than previously reported — about 60,000 to 80,000 fewer per month. Such a shift would suggest the labor market slowed much earlier than current data indicates. While the revision is dated, it strengthens the case for monetary easing by underscoring that hiring momentum had been weaker well before this summer’s slowdown.
Comerica’s chief economist Bill Adams noted that while older revisions have less immediate policy impact, they do set the stage for how the economy’s trajectory is viewed. Fed Governor Christopher Waller, who supported a cut in July, has already said he expects downward revisions of about 60,000 jobs a month. With policymakers widely expected to cut rates at next week’s meeting, the benchmark adjustment could reinforce calls that the Fed should have acted sooner.
The revisions also carry political weight. President Trump, critical of large adjustments to jobs data, recently fired the BLS chief after August’s unusually steep revisions. Still, such corrections are routine, reflecting the incorporation of more comprehensive data. Analysts caution that while the revisions may not alter the Fed’s immediate stance, they highlight a labor market that has been weaker than appreciated, supporting the case for a sustained easing cycle.