Australia's 10-year government bond yield fell back below 5%, reaching its lowest level in nearly three months, as growing confidence that the Reserve Bank of Australia has finished its tightening cycle lifted demand for government debt. The central bank’s 6–3 decision last week to raise the cash rate to an 18-year high of 4.85%, combined with the removal of its tightening bias, strengthened market expectations that borrowing costs have now peaked. Interest rate swaps currently assign an 80% probability that rates have topped out, with roughly 30 basis points of cuts priced in by the end of next year.
At the same time, softer domestic business and consumer sentiment have heightened concerns about the economic outlook amid persistent cost pressures and elevated interest rates. Westpac’s consumer sentiment index fell 2.7% in November to 78.2, its lowest reading in four years. Business confidence also weakened, dropping in October to its lowest level in six years, according to the NAB business survey.
