Summary:
Australia’s 10-year government bond yield was up circa 10 basis points on the week ending at around 4.44%. Two things going on domestically. Firstly, the international. Rising global trade tensions dampened investors’ risk appetite. China’s retaliatory tariffs on select US farm products took effect on Friday, following last week’s US tariff hike from 10% to 20% on Chinese goods. All dovish.
However, domestically, traders continued to assess the RBA’s policy outlook after strong economic data last week reduced expectations of rate cuts. Economic growth surpassed forecasts and accelerated for the first time in over a year. This followed the RBA’s February meeting minutes, which showed board members exercising caution and signalling that a rate cut is not imminent. However, RBA Deputy Governor Hauser warned that uncertainty over US tariffs could lead businesses and households to delay planning and investment, potentially weighing on economic growth.
Overall, the domestic won out over the international by weeks end.
In the US, the yield on the 10-year US Treasury note ended at around 4.28% after selling down earlier in the week Markets are closely watching consumer inflation expectations set for release on Monday, followed by consumer inflation data on Wednesday, producer inflation figures on Thursday, and a consumer sentiment report on Friday. Consider it a big week for data, and expectation data for the last month has been distinctly bearish / hawkish.
Meanwhile, Federal Reserve Chair Jerome Powell reassured markets on Friday, stating that the US economy remains solid while emphasizing that there is no urgency to cut interest rates. However, he acknowledged that trade tensions and policy uncertainty continue to cloud the economic outlook. On Sunday, President Donald Trump also declined to rule out the possibility of a recession, as his administration presses ahead with tariffs on major trading partners.
Exhibit 1. Australian 3Y/10Y Bond Yield
Exhibit 2. AU and US Bond Yields Spread
Exhibit 3. Global Bond Yields
