Summary: Australia’s 10-year government bond yield rose to around 4.48%, circa 4 basis points over the week, as investors continued to assess the Reserve Bank of Australia’s monetary policy outlook. Recent strong economic data has dampened expectations of further rate cuts from the central bank.Data released last week showed that Australia’s annual GDP growth in the fourth quarter exceeded forecasts, marking its first acceleration in over a year.
Earlier data also revealed that the country’s labour market remains tight. Moreover, in the latest RBA meeting minutes, the central bank signalled a cautious approach to future rate decisions, noting that it does not commit to additional reductions. However, yields remained under pressure amid worries about the potential impact of tariffs on global economic growth.
The next RBA Board meeting and Official Cash Rate announcement will be on the 1st April 2025. As at the 14th of March, the ASX 30 Day Interbank Cash Rate Futures April 2025 contract was trading at 95.94, indicating a 12% expectation of an interest rate decrease to 3.85% at the next RBA Board meeting.
Bank bill swap rates fell back this week.
Bank Bill Swap Rates
| TERM TO MATURITY | CLOSING RATE | ?? WEEK | ?? MONTH |
|---|---|---|---|
| 1 month | 4.0904 | 0.0029 | -0.0846 |
| 3 months | 4.1127 | -0.0055 | -0.0666 |
| 6 months | 4.2102 | -0.0115 | -0.0534 |
Swap rates increased across the curve, somewhat outpacing the rises of their Commonwealth Government counterparts.
SWAP RATES
| TERM TO MATURITY | CLOSING RATE | Δ WEEK | Δ MONTH |
|---|---|---|---|
| 1 year | 3.844 | 0 | -0.209 |
| 3 years | 3.637 | -0.069 | -0.1615 |
| 5 years | 3.943 | -0.069 | -0.1501 |
| 10 years | 4.281 | -0.067 | -0.1297 |
| 15 years | 4.457 | -0.06 | -0.1212 |
Exhibit 1: Australian 3Y/10Y Bond Yield
AU and US Bond Yields Spread
What the chart below highlights is just how much the Australian bond market is tracking and mirroring the US market. And that also means the Australian bond market has been exhibiting a high degree of volatility since the start of the year. In fact, bond volatility has been materially higher than equities volatility.
Exhibit 2: AU and US Bond Yields Spread
