Yield Curve

15 September – 19 September 2025

Summary:

The Australian yield curve has steepened modestly in recent months, with the 10-year bond yield maintaining a premium over the 3-year, as shown in the chart spanning January 2019 to mid-2025. The spread, while narrowing from its 2022 highs, remains positive—suggesting investor confidence in medium-term growth and inflation stability. The red and blue lines representing 3-year and 10-year yields respectively, show a synchronized rise through 2023–2024, reflecting RBA tightening and global rate normalisation. The grey-shaded spread area confirms a non-inverted curve, reinforcing a neutral-to-expansionary macroeconomic outlook.

In contrast, the US yield curve has been deeply inverted for much of 2022–2023, with the 2-year yield consistently exceeding the 10-year. The chart highlights this inversion clearly, with the spread dipping below zero and remaining negative for an extended period—a classic recession signal. The green and blue lines show the 2-year yield surging ahead of the 10-year during Fed tightening cycles, while the shaded spread area underscores persistent market concerns about near-term economic contraction. This divergence between Australian and US curves may reflect differing inflation trajectories, central bank guidance, and investor sentiment across the two economies.

Figure 1: Australia 3 and 10-year Bond Yield Spread

Figure 2: US 2 and 10-year Bond Spread

 

To learn more about yield curves and their predictive power, visit this article or this one.

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