| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.80 | 3.75 | 0.05 |
| Australian 10-year bond (%) | 4.45 | 4.38 | 0.08 |
| Australian 30-year bond (%) | 5.00 | 4.95 | 0.05 |
| United States 2-year bond (%) | 3.99 | 3.94 | 0.05 |
| United States 10-year bond (%) | 4.32 | 4.29 | 0.03 |
| United States 30-year bond (%) | 4.63 | 4.60 | 0.03 |
LOCAL MARKETS
Australia’s 10-year government bond yield fell slightly to around 4.48% as fears of a US tariff-driven economic slump heightened risk aversion. Escalating global trade tensions, with countries imposing retaliatory measures against US tariffs, further eroded investor sentiment. Meanwhile, investors awaited key U.S. inflation data to assess the Federal Reserve’s interest rate trajectory. And which came out relatively soft, but there are a bunch of caveats.
Domestically, traders remained focused on the RBA’s policy outlook after recent strong economic data tempered rate cut expectations. GDP growth exceeded forecasts, marking its first acceleration in over a year, while RBA minutes signalled caution, downplaying further easing.
In other news, Australian consumer sentiment hit a three-year high in March, boosted by the RBA’s February rate cut and easing cost-of-living pressures. However, business confidence turned negative in February.
USA Markets
The yield on the 10-year US Treasury note rose to 4.3% on Wednesday, the highest in two weeks, as softer-than-expected inflation print for February eased stagflation concerns. Both headline and core inflation rates fell more than markets had forecasted, but the higher impact of few and specific sections of the American consumer basket, such as airfares, raised scepticism on whether the result actually preludes the sustained momentum of disinflation that is necessary for the Federal Reserve to continue cutting interest rates.
Specifically on the CPI report, CPI increased 0.2% after a sharp 0.5% advance in January. The respite, driven in part by a drop in prices for cars and gas, may be short-lived. Economists anticipate that an escalating trade war will drive up prices on a variety of goods from food to clothing in the coming months, testing the resilience of consumers and the broader economy. To quote Kathy Bostjancic, chief economist at Nationwide “while the CPI report is encouraging, it’s “old news” nonetheless. There’s no disinflation momentum right now. We are predicting a little bit of a bump up in the coming months because of tariffs.”
The uncertainty gripping markets, to state the obvious, is being magnified by the disruptive tariffs and U-turns by President Trump that has raised appeal for the safety of Treasury assets since the start of the month, although investors preferred the shorter end of the curve, driving the 2-year to significantly outperform the 10-year note. Rate futures now reflect that the market has positioned for three 25bps rate cuts by the Fed this year.
