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Overview of the Australian Bond Market

Australian government bond yields dipped modestly on November 4 as the RBA’s hold at 3.6% with upward inflation revisions reinforced caution, aligning with global Treasury gains amid equity selloffs and US money-market stress, though AUD/USD slipped 0.21% to 0.6524 on commodity weakness. The 10-year yield fell one basis point to 4.32%, the 2-year declined one to 3.58%, the 5-year slipped one to 3.80%, and the 15-year dropped one to 4.64%. The move tracked US yield retreats, with SOFR pressures and Fed QT pivot building, potentially easing liquidity strains that could spill into Aussie funding if global rates stay elevated.

September goods exports fell 7.8% and imports rose 3.2%, narrowing surplus to A$1.825 billion below A$4 billion poll, signaling trade headwinds ahead of November 6 data. RBA forecasts imply no 2026 cuts per over 90% of economists, with Bullock citing less easing room than peers amid sticky inflation, risking AUD/USD push toward 0.6707 if aversion strengthens. S&P Global services PMI at 53.1 beat 52.5 poll, supporting growth but underscoring inflation risks.

An extended shutdown-impacted US data void amplifies focus on Australian indicators, with initial jobless claims and PCE prices later, potentially swaying RBA’s path if US resilience bolsters higher-for-longer globally. Yields may face upside if tariffs bite or AI tailwinds fade, but current hawkish stance limits downside amid policy error risks.

Overview of the US Bond Market

Bond traders lifted Treasuries on November 4 as equity weakness from valuation fears and Fed policy splits drove a risk-off mood, with yields dipping amid persistent money-market strains signaling liquidity drying up ahead of quantitative tightening’s December end. The 10-year yield fell three basis points to 4.09%, the 2-year declined three to 3.58%, and the 30-year slipped two to 4.66%, extending Asian and European gains in a bull-steepening move. SOFR eased after Friday’s 18 basis point surge but remained above IORB at 4.13%, with tri-party repo exceeding administered rates, prompting Dallas Fed’s Logan to flag potential asset buys if pressures persist.

The government shutdown, now tied for the longest, clouds December easing odds at about 60% per swaps, with ISM services PMI on November 5 and non-farm payrolls eyed for labor clues that could sway the Fed’s data-dependent path. Bank of America’s Cabana saw diverse FOMC views delaying QT halt and purchases, risking further reserve drain to $2.8 trillion lows, while SMBC’s Abate urged aggressive T-bill buys given hedge fund repo funding twice 2019 levels. BNY’s Velis noted temporary operations risk if rates grind higher.

On the economic front, S&P Global services PMI finalized at 55.2 and composite at 54.8, signaling expansion, but shutdown-impacted data like durable goods and retail sales loom later. JPMorgan’s client survey showed shrinking net longs, with asset managers trimming futures positions per CFTC, concentrated in 5-year and bonds. Dealers expect steady coupon sizes for August-October, but ongoing AI deals and tariff clarity could pressure yields if growth resilience bolsters higher-for-longer views.