Australia’s 10-year government bond yield climbed back above 4.8%, rebounding from four‑month lows as investors continued to price in near-term US interest rate hikes while tempering expectations for additional tightening domestically.
The sharp easing of tensions in the Middle East and the reopening of the Strait of Hormuz pushed oil prices back to pre-war levels, reducing inflationary pressures and leading markets to scale back forecasts for further rate increases in Australia. The probability of an August move by the Reserve Bank is now estimated at just 15%, and markets assign roughly a 50% chance that the tightening cycle has already ended.
At the same time, bond markets faced renewed pressure after US Treasury yields jumped, as investors ramped up bets on a Federal Reserve rate hike ahead of Thursday’s key jobs report, with a September increase now almost fully priced in. This shift occurred even as Fed Chair Kevin Warsh noted that inflation expectations had eased over the past month.
