| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.825 | 3.862 | 0.037 |
| Australian 10-year bond (%) | 4.416 | 4.482 | 0.066 |
| Australian 30-year bond (%) | 4.937 | 4.986 | 0.049 |
| United States 2-year bond (%) | 4.309 | 4.357 | 0.048 |
| United States 10-year bond (%) | 4.533 | 4.627 | 0.094 |
| United States 30-year bond (%) | 4.741 | 4.8321 | 0.091 |
* Implied yields from September 2025 futures. As at 14th Feb.
LOCAL MARKETS
Australia’s 10-year government bond yields fell to around 4.48%, mirroring declines in global yields as markets continued to monitor trade tensions. US President Donald Trump signed an executive order for reciprocal tariffs but delayed imposing levies, stating they would take effect only after the White House reviews appropriate tariff levels. Meanwhile, stronger-than-expected US PPI inflation in January prompted markets to push back Fed rate cut expectations to September from June.
From 12 February, the markets repriced a 25 bps cut from the RBA on 18 February from 95% to 90%. This came on the back of the hotter than expected January CPI print. Do not underestimate the likelihood of the RBA staying on pause on 18 February and which will shape as the most important RBA announcement of the year. The look of a central bank lacking a strategic direction on rates is not a good look. The 90% probability is a gross over-estimation in our view.
US BOND MARKETS
The yield on the 10-year US Treasury note fell to below the 4.5% threshold on Friday, extending the aggressive pullback from the previous session after fresh data challenged the long-lasting view of a resilient US consumer. Headline retail sales sank by 0.9% in January, the most in one year. Also, the unexpected plunge in the control group stoked fears that the PCE will not meet previous expectations set by the Federal Reserve.
The data favoured the outlook that the Fed will reduce interest rates this year to attend a slowing economy, magnifying the impact of soft readings in the components of producer inflation data that are passed onto the PCE price index. However, worth noting the weather effects in January – snow in New Orleans, Houston, LA widfires, for eg. Point being is the market may see this as a one off report. Trends matter.
