Summary:
Australia’s 10-year government bond yield remained elevated at a five-week high of 4.51%, despite recent soft inflation data. Australia’s headline inflation eased to 2.4% in February from 2.5% in the previous month, while core inflation also fell to 2.7% from 2.9%. The data comes less than a week before the Reserve Bank of Australia’s next policy decision on April 1, where the central bank is expected to keep rates unchanged.
Meanwhile, markets currently see a 64% chance of a rate cut in May. However, the central bank has warned earlier that further monetary easing is not guaranteed, after its first rate cut in over four years last month. In other news, the Australian government on Tuesday announced two additional personal income tax cuts set for 2026 and 2027, totalling A$17.1 billion over the forward estimates.
The next RBA Board meeting and Official Cash Rate announcement will be on the 1st April 2025. As at the 26th of March, the ASX 30 Day Interbank Cash Rate Futures April 2025 contract was trading at 95.93, indicating a 8% expectation of an interest rate decrease to 3.85% at the next RBA Board meeting.
Bank Bill Swap Rates
| TERM TO MATURITY | CLOSING RATE | WEEK | MONTH |
|---|---|---|---|
| 1 month | 4.0925 | -0.0006 | 0.0075 |
| 3 months | 4.1109 | -0.0102 | -0.0051 |
| 6 months | 4.268 | 0.0103 | 0.0541 |
SWAP RATES
| TERM TO MATURITY | CLOSING RATE | Δ WEEK | Δ MONTH |
|---|---|---|---|
| 1 year | 3.794 | 0.0009 | -0.0466 |
| 3 years | 3.6355 | -0.0408 | -0.0758 |
| 5 years | 3.9568 | -0.0251 | -0.0238 |
| 10 years | 4.3045 | -0.0155 | 0.0145 |
| 15 years | 4.4895 | -0.0067 | 0.0407 |
Exhibit 1: Australian 3Y/10Y Bond Yield
NB. Spreads are calculated with respect to “spot” Australian Commonwealth Government bond yields.