FX.co ★ Australia 10-Yr Yield Stays Close to 2-Year Highs

Australia's 10-year government bond yield edged down to approximately 4.75%, yet it stayed near a level not seen for over two years, as market participants continued to anticipate imminent rate hikes despite data suggesting a cooling inflation. The headline inflation rate slowed to 3.4% in November from 3.8% in October, falling short of the projected 3.7%. The trimmed mean inflation, which is closely monitored, also softened to 3.2% from 3.3%. However, both metrics remain above the Reserve Bank of Australia's target range of 2–3%, indicating persistent inflationary pressures. The focus now turns to the comprehensive fourth-quarter CPI report expected later this month for additional insights. In recent statements, the central bank has indicated that monetary tightening might be necessary if the disinflationary trend does not proceed as expected. Currently, traders estimate a 35% chance of a 25-basis-point rate increase at the Reserve Bank’s February meeting, with such an adjustment nearly fully factored in by May.