| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.752 | 3.805 | -0.053 |
| Australian 10-year bond (%) | 4.376 | 4.425 | -0.049 |
| Australian 30-year bond (%) | 4.921 | 4.993 | -0.072 |
| United States 2-year bond (%) | 3.966 | 3.961 | 0.005 |
| United States 10-year bond (%) | 4.241 | 4.424 | -0.183 |
| United States 30-year bond (%) | 4.559 | 4.646 | -0.087 |
LOCAL MARKETS
Australia’s 10-year government bond yield dropped to around 4.4% as investors assessed the latest labour market data. The unemployment rate remained unchanged at 4.1% in February, aligning with expectations. Meanwhile, employment declined by 52,800 over the month, defying forecasts of a 30,000 increase. This raised concerns about potential weakness in the labour market, which, if sustained, could eventually give the Reserve Bank of Australia more room to lower interest rates.
However, RBA Assistant Governor Sarah Hunter earlier in the week noted that while the board saw room to reduce restrictiveness—referencing the RBA’s recent decision to ease policy, it remained more cautious than markets about further rate cuts. Domestic yields also followed a decline in U.S. bond yields after the Federal Reserve held its interest rate steady but projected two rate cuts this year.
US MARKETS
The yield on the 10-year US Treasury fell to below 4.2% on Thursday, closing in on the lowest level since early December as markets continued to assess risks of an economic slowdown. The Federal Reserve held its rates unchanged, as expected, but its dot-plot indicated that the FOMC continues to project only two 25bps rate cuts this year to account for lower growth and higher unemployment.
As a result, traders began to price in three rate cuts by the Fed this year, up from prior expectations of just two cuts before the decision. This shift occurred despite projections for higher inflation, although Chairman Powell emphasized that policymakers view the inflationary impact of tariffs as temporary. Bonds were also supported by the Fed slowing its balance sheet runoff to address signs of lower underlying liquidity. The Fed’s Treasury holding will be reduced by $5 billion per month instead of $20 billion, while the $35 billion runoff for MBSs are unchanged.
