| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.367 | 3.398 | -0.031 |
| Australian 10-year bond (%) | 4.301 | 4.328 | -0.027 |
| Australian 30-year bond (%) | 5.052 | 5.074 | -0.022 |
| United States 2-year bond (%) | 3.763 | 3.761 | 0.002 |
| United States 10-year bond (%) | 4.322 | 4.328 | -0.006 |
| United States 30-year bond (%) | 4.9213 | 4.9254 | -0.0041 |
Overview of the Australian Bond Market
Australian government bond yields fell on August 20, 2025, as PMI expansion and rate-cut bets post-RBA move spurred buying, though macro resilience limited declines amid US housing surge. The 10-year yield dropped 5 basis points to 4.27%, 2-year -5 to 3.31%, 5-year -5 to 3.63%, 15-year -5 to 4.65%. Monthly down (10-year -7 bp), reflecting dovish tilt despite data.
August PMIs (Composite 54.9) affirm growth post-3.60% cut, Bullock data-dependent with “couple more” possible amid trade surplus. Global cues: US housing beat (1.428M vs. poll), China truce extension, Ukraine summit promise (Trump-Putin call, potential trilateral) ease risks if de-escalation holds, potentially stabilizing commodities/inflation.
Traders added longs on PMIs, Fed swaps ~60% September 25 bp from 4.25%-4.5%, pacts sustaining higher-rates but PMIs support soft landing, bonds hedging volatility from stalled summit if no quick deal. Locally, yields eased on sector rotations, shorter focus. Tomorrow’s Philly Fed (poll 7), US PMIs could sway if soft, aiding bonds, though vigor caps. Dealers stable auctions August-October per guidance, summit progress aiding diversification.
Overview of the US Bond Market
The U.S. 10-year Treasury yield was around 4.30% on August 20, slipping 0.037 percentage points, while broader bond yields hovered near 4.22%, slightly lower week-on-week. Short-term yields remain anchored by expectations of Federal Reserve easing, but long-term rates face pressure from inflation and fiscal deficit concerns, leaving the curve steep. Strategists in a Reuters poll expect the 10-year yield to ease to 4.21% by mid-2025 and 4.14% within a year, despite volatility. However, Business Insider notes yields may stay elevated through year-end, supported by heavy government borrowing, quantitative tightening, and new demand from stablecoin related investors.
Minutes from the Federal Reserve’s July 29–30 meeting revealed that most policymakers saw inflation risks as outweighing concerns over the labor market, with tariffs driving a widening split within the committee. A majority of the 18 participants judged the “upside risk to inflation” as greater, emphasizing that inflation had exceeded 2% for an extended period, raising the risk of longer-term expectations becoming unanchored if tariff impacts persisted. While some officials highlighted weakening job growth and rising unemployment, others maintained that inflation remained “somewhat elevated” and required vigilance.
The Fed left rates unchanged at 4.25%–4.5%, citing uncertainty as growth moderated in the first half of the year. The labor market was still described as “solid,” though large payroll revisions showed slowing momentum. Hiring dropped to its weakest pace since the pandemic, and unemployment edged up to 4.2%. Governors Christopher Waller and Michelle Bowman dissented, citing labor market concerns.
Policymakers debated whether tariffs would generate only a temporary price shock or a more lasting inflationary effect, with many warning that the full impact on consumer prices could take time to materialize. Recent wholesale inflation data—the sharpest increase in three years—reinforced these concerns, suggesting companies were already passing on costs.
Chair Jerome Powell noted that tariff-related inflation might prove temporary but cautioned against underestimating its persistence. He is expected to provide further guidance at this week’s Jackson Hole symposium, a forum he has previously used to signal policy shifts.
Beyond inflation and jobs, officials also discussed financial stability, highlighting stretched asset valuations. Political pressure loomed in the background as President Trump renewed attacks on Powell and demanded the resignation of Governor Lisa Cook over mortgage fraud allegations. Treasury Secretary Scott Bessent and others have called for aggressive cuts, including a possible half-point reduction in September.
