| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.333 | 3.283 | 0.050 |
| Australian 10-year bond (%) | 4.218 | 4.23 | -0.012 |
| Australian 30-year bond (%) | 4.954 | 4.973 | -0.019 |
| United States 2-year bond (%) | 3.861 | 3.806 | 0.055 |
| United States 10-year bond (%) | 4.387 | 4.389 | -0.002 |
| United States 30-year bond (%) | 4.832 | 4.879 | -0.047 |
LOCAL BOND MARKETS
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.
US BOND MARKETS
The yield on the US 10-year Treasury note fell by about 8 basis points to 4.31% on Wednesday, extending Tuesday’s modest decline, as investors reacted positively to President Trump’s reassurance that he has no intention of firing Fed Chair Jerome Powell. Markets had been rattled by fears of political interference in US monetary policy and threats to the Federal Reserve’s independence.
Additionally, a more conciliatory tone from the Trump administration toward China helped boost investor sentiment and ease pressure on the bond market. US Treasury yields had spiked earlier in the month amid mounting policy uncertainty and growing concerns about a potential recession.
Safe haven? Investors typically flock to US Treasury bonds as a haven from gyrations in financial markets. They rallied during the global financial crisis, on 9/11 and even when America’s own credit rating was cut. Yet something unusual happened in early April amid the chaos unleashed by President Donald Trump’s imposition of “reciprocal” tariffs. Instead of rising as riskier assets like stocks and cryptocurrencies tumbled, Treasuries followed them lower. Yields on US government bonds saw their biggest weekly surge in over two decades.
The sense that the $29 trillion Treasuries market is the port of choice in a market storm has been a unique advantage for the world’s biggest economy, helping to keep a lid on US borrowing costs over the decades. But lately they’ve been trading a little more like a risky asset. Former Treasury Secretary Lawrence Summers went so far as to say they were behaving like the debt of an emerging-market country.
Dash for cash? Some investors may have ditched Treasuries along with other US assets to hide out in the ultimate haven: cash. Assets in US money-market funds — which are often viewed as like cash, with the extra upside that they earn money over time — have soared for some time as the Federal Reserve delayed rate cuts, and reached a record in the week through April 2.
We said several weeks ago – watch money market inflows.
