| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.918 | 3.956 | -0.04 |
| Australian 10-year bond (%) | 4.513 | 4.543 | -0.03 |
| Australian 30-year bond (%) | 5.038 | 5.046 | -0.01 |
| United States 2-year bond (%) | 4.192 | 4.266 | -0.07 |
| United States 10-year bond (%) | 4.42 | 4.499 | -0.08 |
| United States 30-year bond (%) | 4.669 | 4.738 | -0.07 |
AUSTRALIA MARKET WARP
Australia’s 10-year government bond yield steadied around 4.57% but remained near its highest level in over a month, as investors assessed fresh economic data. Flash PMI figures indicated continued expansion in Australia’s business activity in February, supported by growth in both manufacturing and services sectors.
Meanwhile, earlier data showed that the country’s labour market remained strong in January, complicating the case for further interest rate cuts. The Reserve Bank of Australia reduced its cash rate by 25bps to 4.10% on Tuesday but cautioned that further easing was not guaranteed due to persistent inflation risks. Currently, markets see only a small chance of a rate cut in April, with expectations rising to 68% for a potential move in May.
US MARKETS
The yield on the 10-year US Treasury note fell past 4.45% on Friday, the lowest in two weeks, as pessimistic economic data magnified the impact of favourable developments in the US bond market. Fresh data showed that the US services sector unexpectedly contracted in February as concerns about lower government spending drove clients to halt new orders, marking a sharp swing for the sector that had been resilient for two years. The data favoured bets that the Fed is due to lower interest rates this year, with only 15% of the market positioned for no cuts by December.
Meanwhile, the Treasury signalled it will not increase the share of longer term securities in the near future, limiting the supply of securities in the longer end of the curve. This compounded support for 10-year notes after FOMC minutes showed that the Fed thinks it may be appropriate to pause asset selling until the resolution of debt ceiling dynamics, setting the stage for a potential end to quantitative tightening.
