| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.293 | 3.304 | -0.011 |
| Australian 10-year bond (%) | 4.189 | 4.193 | -0.004 |
| Australian 30-year bond (%) | 4.87 | 4.863 | 0.007 |
| United States 2-year bond (%) | 3.876 | 3.882 | -0.006 |
| United States 10-year bond (%) | 4.358 | 4.34 | 0.018 |
| United States 30-year bond (%) | 4.8866 | 4.856 | 0.0306 |
Overview of the Australian Bond Market
Australian government bond yields edged higher, with the 10-year yield rising 3 basis points to 4.21%, and the 15-year up 4 basis points to 4.56%, reflecting cautious optimism ahead of tomorrow’s RBA decision. The 2-year yield increased 1 basis point to 3.28%, while the 5-year rose 2 basis points to 3.61%.
The uptick follows last week’s softer May CPI data (2.4% trimmed mean), reinforcing an 86% probability of a 25-basis-point rate cut tomorrow to 3.60%, with three more cuts priced by year-end. Credit spreads tightened, with 5-year major bank seniors at +80 basis points and Tier 2s at +160 basis points, supported by low EOFY supply expectations.
Global yields were subdued overnight, with focus on Powell’s cautious Fed stance and tariff impacts. The Australian dollar held steady at 0.6586 US cents, as markets brace for the RBA’s 1:30 PM AEST announcement, which could drive further yield adjustments.
Overview of the US Bond Market
Treasury yields climbed as trade tensions and inflation concerns dominated, with the benchmark 10-year note yielding 4.38%, up 13 basis points from a month ago. The 30-year yield rose to 4.92%, gaining 44 basis points over the past year, reflecting unease about US fiscal sustainability.
The 2-year yield dipped 14 basis points to 3.89%, while the 5-year held at 3.96%, down 16 basis points monthly. The yield curve steepened, signaling mixed expectations for rate cuts. Federal Reserve Chair Jerome Powell’s testimony yesterday reiterated a cautious stance, with markets now pricing two cuts by year-end, leaning toward September over July despite a slight uptick in July bets.
Treasury Secretary Scott Bessent’s push to ease bank capital requirements, allowing more Treasury purchases, supported yields. Investors await tomorrow’s jobs report, which could sway the Fed’s next move as the tariff deadline looms.
