Daily

4 July 2025

ClosePrevious CloseChange
Australian 3-year bond (%)3.3043.2890.015
Australian 10-year bond (%)4.1934.1850.008
Australian 30-year bond (%)4.8634.8620.001
United States 2-year bond (%)3.8823.8820
United States 10-year bond (%)4.344.340
United States 30-year bond (%)4.8564.8560

Overview of the Australian Bond Market

Australian government bond yields rose modestly on Friday, with the 10-year yield ticking up 1 basis point to 4.19%, the 2-year yield increasing 2 basis points to 3.27%, and the 15-year yield holding steady at 4.52%. The 5-year yield edged up 1 basis point to 3.59%, which reflects the cautious sentiment.

The moves follow the softer May CPI data, solidifying expectations of a July rate cut from 3.85% to 3.60%, with a 94% probability priced in by swap markets. At least four cuts (100 basis points) are anticipated by mid-2026, with three likely before Christmas. The Australian dollar remained stable at 0.6586 US cents, supported by a quiet global yield environment.

Credit spreads tightened further, with 5-year major bank senior spreads at +80 basis points and Tier 2 spreads at +160 basis points, aided by low supply ahead of EOFY.

Overview of the US Bond Market

With US markets closed for Independence Day, Treasury yields showed little movement in pre-market trading on Friday. The benchmark 10-year note, which closed at 4.35% on Thursday, and the 30-year bond at 4.86%, is expected to remain stable until Tuesday’s reopening, barring global shocks.

The yield curve’s recent steepening, with the 2-year note at 3.88% and 5-year at 3.94%, reflects ongoing debates over a July rate cut, with a 65% probability priced in. Federal Reserve vice Chair Bowman’s support for a potential cut contrasts with Chair Powell’s caution on tariff-driven inflation risks. President Trump’s review of Powell’s successor and Treasury Secretary Bessent’s bank capital relief proposal continue to stir speculation.

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