Summary:
On Tuesday, Australia’s 10-year government bond yield held around 4.26% as investors weighed risks stemming from President Trump’s renewed criticism of the Federal Reserve. On Monday, Trump increased pressure on Fed Chair Powell and suggested that he might be removed, raising concerns about the central bank’s independence. This, combined with ongoing uncertainty over US trade policies, added to investor caution.
Meanwhile, traders are increasingly anticipating an interest rate cut by the Reserve Bank of Australia at its May meeting. While a 25 basis-point cut is widely expected, some are pricing in a more aggressive 50 basis-point move amid growing fears of a global slowdown driven by trade tensions. Investors are now awaiting Australia’s upcoming PMI data for further insight into the domestic economic outlook.
By Wednesday, Australia’s 10-year government bond yield rose slightly to 4.25% amid improved sentiment after U.S. Treasury Secretary Scott Bessent expressed optimism about de-escalating trade tensions with China, saying current tariffs are unsustainable. President Donald Trump also said that tariff rates with China, Australia’s top trading partner, would come down substantially if Beijing agrees to a trade deal.
Simultaneously, Trump backed down from earlier threats to dismiss Fed Chair Jerome Powell, easing concerns over the U.S. central bank’s independence. Meanwhile, on the domestic front, markets still implied the Reserve Bank of Australia would deliver a 25bps rate cut in May, but abandoned pricing for a larger half-point move. In economic news, Australia’s private sector growth slowed slightly in April but remained in expansion territory for a seventh straight month, supported by continued strength in both manufacturing and services sectors.
Exhibit 1: Implied RBA Cash Rate Expectations
CASH ACCOUNT.
| Product | Interest Rate p.a. | Notes |
|---|---|---|
| AMP Saver Account | 5.20% | Min. monthly $1,000 dep. Limit $250,000. |
| ANZ Premium | 0.05% | $10,000 - $499,999 |
| ANZ Progress Saver | 4.10% | Make at least one deposit of $10 or more in a month, make no withdrawals (including transfers), or incur any fees, charges in the month. |
| Arab Bank Online Savings | 4.35% | On balances of $250,000 to $499,999 |
| Bankwest Hero Saver | 4.60% | On balances up to $250,000.99 with no withdrawals in that month |
| BOQ Fast Track Saver | 2.75% | $1000 minimum monthly deposit. On balances up to $250,000, over part the Base Rate of 0.05% p.a. applies |
| BoQ Bonus Interest Savings | 5.45% | Bonus interest is paid into your account when you limit your withdrawals to a maximum of one per month |
| CBA NetBank Saver | 2.35% | 2.40% p.a. fixed bonus margin for the first 5 months on your first NetBank Saver |
| CBA Goal Saver Account | 4.90% | At least 1 deposit required; balance at end of month must exceed balance at start of month. |
| Great Southern Bank | 4.30% | No bonus conditions |
| Heritage Online Saver | 3.45% | $1 or more, bonus intro rate 1.45% (promotional 4 month rate on new accounts up to $100,000) |
| ING Savings Accelerator | 4.70% | $150,000 and over |
| Macquarie CMA | 2.75% | Minimum $5,000 |
| ME Online Savings | 4.25% | Have both Online Savings Account and Everyday Transaction Account. On balances up to $250,000. Make at least four "tap & go" purchases per month. |
| NAB iSaver | 2.00% | Bonus rate 2.65% for the first four months when you open your first NAB iSaver account |
| NAB Reward Saver | 5.00% | make at least one deposit on or before the second last banking day of the month and no withdrawals during the month |
| Rabobank PremiumSaver | 5.35% | On balances to $250,000. Balance increased by $200 a month. |
| RAMS Saver Account | 1.40% | On balances to $500,000. Minimum $200 deposit each month with no withdrawals. |
| Suncorp Growth Saver | 5.05% | Minimum $200 deposit each month and no more than 1 withdrawal |
| ubank Save Account | 5.00% | 5.5% on first $100,000, 5.0% on next $150,000; applies only on amounts upto $250,000. Minimum $500 deposit each month into Spend or Save accounts. |
| Up Savers Account | 4.35% | Make 5 successful purchases using your Up or 2Up debit card or digital wallets in a month. |
| Westpac eSaver | 1.10% | 4.25% p.a. for the first 5 months for new Westpac eSaver customers |
| Westpac Reward Saver | 5.00% | Make a deposit to the account and ensure account balance is higher at the end of the month than the beginning. Keep your account balance above $0 at all times. |