| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.347 | 3.325 | 0.003 |
| Australian 10-year bond (%) | 4.273 | 4.23 | 0.015 |
| Australian 30-year bond (%) | 5.016 | 4.97 | 0.019 |
| United States 2-year bond (%) | 3.742 | 3.728 | 0.06 |
| United States 10-year bond (%) | 4.297 | 4.293 | 0.085 |
| United States 30-year bond (%) | 4.8979 | 4.8867 | 0.0883 |
Overview of the Australian Bond Market
Australian government bond yields surged on August 18, 2025, as risk-on equity records and tariff truce extension diminished safe-haven demand, though monthly declines signal ongoing easing expectations. The 10-year yield jumped 8 basis points to 4.30%, 2-year +4 to 3.34%, 5-year +5 to 3.65%, 15-year +8 to 4.68%. Over the month, yields fell (10-year -3 basis points), reflecting RBA dovishness despite resilient data.
July labor figures (employment +24.5k near poll, unemployment 4.2%) and wages (3.4% yearly slight beat) support gradual cuts post-3.60%, with Bullock’s “couple more” data-tied amid trade surplus strength. Global macro, including US-China 90-day extension and US retail +0.5% (met), industrial -0.1% (miss), influence sentiment.
Bond traders pared longs as Fed swaps hold ~60% for September 25 basis-point cut from 4.25%-4.5%, trade pacts easing uncertainty but sustaining higher-rates view, pressuring prices. Locally, yields rose on bank/earnings boosts, focus shifting to shorter tenors. Tomorrow’s US housing starts (poll 1.29 million) could sway if weak, aiding bonds as hedges, though vigor caps rallies. Dealers expect stable auctions August-October per guidance, tariff clarity supporting diversification.
US, Russian, and Ukrainian officials, along with Presidents Trump and Zelenskyy, are in promising peace talks. A Trump-Putin call and plans for a trilateral meeting signal progress. Zelenskyy has secured long-term US support, and Russia is considering security concessions, aiming to de-escalate tensions and stabilize markets.
Overview of the US Bond Market
The U.S. Treasury market saw modest movement at the start of the week, with the 10-year yield rising two basis points to 4.34%, extending gains triggered by last week’s sharp jump in wholesale inflation, the biggest in three years. Trading volumes were subdued, while the dollar strengthened, oil edged higher, and gold fluctuated. In the UK, 30-year inflation-linked yields surged to their highest level since 1998, providing additional momentum to global bond markets.
Investor focus remains firmly on Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium. Markets are eager for confirmation that the Fed will cut interest rates in September, with interest-rate swaps showing an 80% probability of a 25-basis-point reduction and two cuts fully priced in by year-end. Analysts warn that a non-committal stance from Powell could unsettle markets, which are currently trading as though easing is assured.
Jackson Hole has historically served as a stage for policy surprises. In 2022, Powell’s hawkish message drove yields higher, while last year he signaled readiness to cut, triggering a sharp rally. Some traders are now betting on a larger 50-basis-point cut in September, with option trades positioned to profit if markets price in deeper easing.
Political pressure is also influencing sentiment, with President Trump and his administration urging lower borrowing costs to counter tariff impacts. The next decisive signal will come from August jobs data on September 5, which could lock in expectations for rate cuts and shape whether easing starts modestly or more aggressively.
