| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.76 | 3.72 | 0.04 |
| Australian 10-year bond (%) | 4.36 | 4.28 | 0.08 |
| Australian 30-year bond (%) | 4.92 | 4.85 | 0.07 |
| United States 2-year bond (%) | 4.01 | 3.96 | 0.05 |
| United States 10-year bond (%) | 4.28 | 4.21 | 0.07 |
| United States 30-year bond (%) | 4.57 | 4.52 | 0.06 |
LOCAL MARKETS
Australia’s 10-year government bond yield rose to around 4.4% as investors reacted to strong GDP report. Australia’s economy expanded 1.3% from a year earlier in the final quarter of 2024, surpassing forecasts of a 1.2% growth and accelerating for the first time since the third quarter of 2023. On a quarterly basis, GDP grew 0.6%, beating the forecasted 0.5% rise and achieving the fastest growth rate in two years.
On the monetary policy front, minutes from the Reserve Bank of Australia’s February policy meeting suggested that another interest rate cut is not imminent, with board expressing caution. The central bank indicated that an extended period at the current 4.10% cash rate remains a possibility if inflation remains persistent. Meanwhile, RBA Deputy Governor Andrew Hauser warned that uncertainty stemming from US President Donald Trump’s tariffs could prompt businesses and households to delay planning and investment, potentially weighing on economic growth.
US MARKETS
The yield on the 10-year US Treasury note was at 4.23% on Wednesday, trimming declines from the morning after stronger services activity reflected by the ISM PMI eased concerns on the extent of lower growth. Still, worries over an aggressive trade war and a softer labour market kept yields near four-month lows touched this week.
Data from the ADP showed that 77,000 job were added to the US private sector, the least since July, and well below forecasts of a 140,000 addition, adding to labour market concerns following the surge in initial unemployment claims. This was after President Trump confirmed that the US would impose 25% tariffs on major trading partners Canada and Mexico yesterday, in addition to an increased tariff of 20% on China. Growth concerns were also stemmed by the President’s pledge to balance the Federal budget despite current deficits near the 7% to GDP mark, backing bets of steep spending cuts. Markets now have positioned for three rate cuts by the Fed this year.
German bonds suffered their worst day since the months following the fall of the Berlin Wall on an historic spending plan that will unlock hundreds of billions of euros for defense and infrastructure investments. The yield on the nation’s 10-year bonds recorded biggest jump since March 1990, up 30 basis points, after chancellor-in-waiting Friedrich Merz outlined a sweeping fiscal overhaul late on Tuesday. The last time benchmark bond yields surged so much, West Germany and East Germany were about to reunify as the Cold War drew to a close. We’d say this is a wake up call for European bonds in general. Germany won’t be alone here.
