FX.co ★ Australia’s 10-Year Bond Yield Falls

On Friday, the yield on Australia's 10-year government bond declined to approximately 4.26%, marking its lowest point in over two weeks, as investors evaluated recent economic data. Retail sales experienced an unexpected drop in April, influenced by unusually warm weather that curbed the demand for winter apparel and a reduction in promotional events at department stores, indicating heightened consumer caution. Earlier in the week, reports showed that the monthly Consumer Price Index (CPI) slightly exceeded expectations in April, though it remained consistent with the preceding two months and represented the lowest level since November 2024. Despite reduced borrowing costs and a moderation in inflation, household spending continues to be lethargic, as the April figures suggest a tepid beginning to the second quarter. This ongoing sluggishness led the Reserve Bank of Australia (RBA) to reduce interest rates by 25 basis points to 3.85% earlier this month, following an initial rate decrease in February. Financial markets are now anticipating at least three more rate cuts throughout this year, which could potentially lower the cash rate to 3.10%.