Australia’s 10-year government bond yield climbed above 5.2%, its highest level since July 2011, as surging oil prices stoked inflation fears and stronger‑than‑expected economic data reinforced expectations of an imminent interest rate hike. The economy grew 0.4% quarter-on-quarter in Q2, outpacing forecasts of 0.3%, while annual growth accelerated to 2.1%, compared with expectations of 1.8%. These stronger readings indicate that economic activity remains resilient despite the Reserve Bank’s efforts to cool demand and tame persistent inflation.
Following the GDP release, markets increased the implied probability of a fourth rate hike at the September meeting to 57%, up from 48%, while a November hike is now more than fully priced in. The likelihood of an additional increase in Q1 2027 also rose to 82% from 62%. At the same time, escalating US–Iran tensions and the accompanying surge in oil prices have revived inflation risks across major economies, pushing global bond yields higher.
