| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.768 | 3.714 | 0.054 |
| Australian 10-year bond (%) | 4.357 | 4.312 | 0.045 |
| Australian 30-year bond (%) | 4.873 | 4.851 | 0.022 |
| United States 2-year bond (%) | 4.214 | 4.185 | 0.029 |
| United States 10-year bond (%) | 4.436 | 4.42 | 0.016 |
| United States 30-year bond (%) | 4.641 | 4.642 | -0.001 |
* Implied yields from March 2025 futures. As at 7th February.
LOCAL BOND MARKETS
Australian bond yields edged higher today, with the 3-year yield at 3.768% (+0.054pp), 10-year at 4.357% (+0.045pp), and 30-year at 4.873% (+0.022pp), reflecting a cautious market outlook. Investors are closely watching key economic indicators, particularly the upcoming U.S. jobs report, which could influence global rate expectations. Major banks like ANZ, CBA, Westpac, and NAB had mixed results, with most capital notes trading above par. Yields on longer-term securities dipped slightly, showing investor confidence in bank stability despite interest rate uncertainty. The market remains driven by expectations of RBA policy changes, inflation, and economic trends.
US MARKETS
Top Stories / Developments
- 2- and 10-year Treasury yields rose after a stronger than expected jobs report (+8bps to 4.30% and +5bps to 4.50%, respectively).
- University of Michigan Sentiment Index Consumer inflation expectations up a full percentage point in 12-months’ time (from 3.3% to now 4.3%)
- Market view is now definitively that the Fed is on pause, with traders pricing in first 2025 interest-rate cut in September
The US employment report for January was hotter than expected: payrolls up by 143,000; unemployment rate ticked down to 4%; average hourly earnings up 0.5%; participation rate also up. Yields consequently increased. Later in the day the University of Michigan Sentiment Index data showed that consumers expect inflation to be a full percentage point higher in 12-months from 3.3% to 4.3% on account of tariffs. The heightened near-term inflation expectations drove down consumer sentiment to a 7-month low in early February.
While not the largest move in yields, the data releases are very significant Fed policy wise. Unemployment rate coming down and inflation expectations going up is effectively Fed kryptonite. The data reinforces the prevailing view of ‘higher for longer’ and the that Fed can be quite patient, not needing to move anytime soon and more so given the uncertainties regarding tariffs. On the topic of the latter and which will likely impact Fed timing, it may take some time on what the full details are and, consequently, have true clarity between the economic data and ultimately what the interest rate term policies will be.
