Australia’s 10-year government bond yield climbed to around 4.71% on Wednesday, extending its rebound from the previous session, after stronger-than-expected inflation data reinforced expectations of further monetary tightening. Headline inflation held steady at 3.8% in January, slightly above the 3.7% consensus forecast. The closely watched trimmed mean inflation rate inched up to 3.4%, beating expectations and December’s 3.3% reading. This marked the seventh consecutive month that underlying inflation has remained above the Reserve Bank of Australia’s 2–3% target range, heightening the risk of a robust first-quarter inflation outcome.
Today’s figures followed a strong labour market report and elevated wage growth last week, prompting investors to increase bets on additional interest rate hikes. Futures markets now imply roughly an 80% probability of a 25-basis-point move in May, with at least one rate increase fully priced in by June.
