Australia’s 10-year government bond yield climbed back above 4.7% but held close to a four-month low, as markets scaled back expectations of additional domestic rate hikes even as renewed tensions in the Middle East rekindled inflation worries. Oil prices rose after the latest flare-up in the region disrupted the nascent recovery in crude shipments through the Strait of Hormuz, which had followed an earlier interim agreement. This came despite the US and Iran agreeing to pause further attacks after their recent exchange of strikes near the strategic chokepoint.
In Australia, attention now turns to Tuesday’s release of minutes from the Reserve Bank’s most recent policy meeting. The central bank kept the cash rate unchanged at 4.35% in June, following three increases earlier this year. While employment data have shown a rebound, a run of mixed inflation readings has left markets divided on the likelihood of another hike, currently priced at around a 50% chance by year-end. At the same time, some investors have begun to factor in the possibility of rate cuts in the second half of 2027.
