FX.co ★ Australia 10-Year Yield Slips Toward 2-Month Low

The yield on Australia's 10-year government bonds has dropped to approximately 4.13%, nearing its lowest point in over two months. This decline is largely attributed to recent subdued economic data, which has bolstered expectations of imminent interest rate cuts. According to S&P Global, the growth in the manufacturing sector significantly slowed in June to its weakest level since February. This slowdown was driven by a reduction in new orders for the first time in five months, resulting from sufficient client inventories and deteriorating market conditions. Consequently, this has strengthened forecasts for a rate cut in July, especially following May's notable decline in inflation, which brought figures close to the lower boundary of the Reserve Bank's 2–3% target range. Market swaps currently reflect a 92% likelihood of the Reserve Bank of Australia implementing another cut from the existing 3.85% cash rate, in addition to the adjustment made in May. Financial markets have already factored in a total easing of 95 basis points, equating to approximately four rate cuts by early next year. Investors are now turning their attention to May's retail sales and trade data to gain further insight into Australia's economic growth prospects and future monetary policy direction.