Summary: .
The Australian bond market continued its recent trend of softening yields on 20 June, reflecting a cautious but steady investor sentiment ahead of key economic data releases. The 10-year bond yield eased to 4.22%, down 3.3 bps from the previous session 1. The 3-year government bond yield slipped to 3.36%, a modest decline of 1.4 bps. The longer dated 20-year bond yield declined to 4.82%, a 0.04 percentage point drop from the previous day while the 30-year bond yield also softened, settling at 4.92%, down 3.7 bps.
This across-the-curve decline suggests a market in a holding pattern, with investors positioning defensively amid expectations of a potential pivot by the Reserve Bank of Australia (RBA). The Bloomberg AusBond Composite Index ticked up by 0.09%, continuing its gradual rally. This indicates cautious optimism, with investors favoring fixed income as they await clearer signals from both domestic and global central banks.
Markets are increasingly pricing in a 90 basis point rate cut over the next year, targeting a 2.85% cash rate. However, no aggressive moves are being made yet—investors are largely in a wait-and-see mode for further developments on tariffs and geopolitical fronts.
Figure 1: Aust. 10 yr minus 3 yr Bond Spread
Figure 2: Australian & US Bond Yields
Figure 3: US 10 yr minus 2 yr Bond Spread
