FX.co ★ Australia 10-Year Yield Hovers Near 2-Month Low

On Wednesday, Australia's 10-year government bond yield inched up to 4.14%, though it stayed close to the two-month low observed the day before. This movement in bond yield was influenced by weaker-than-anticipated retail sales data, which strengthened the likelihood of an imminent interest rate cut. Retail sales in Australia increased by 0.2% month-on-month in May, following no change in April, falling short of a forecasted 0.4% rise. This disappointing retail performance adds to a series of lackluster economic indicators, including tepid GDP growth for the first quarter and moderate inflation figures for May. These factors have led many economists to adjust their expectations, projecting a rate cut from the Reserve Bank of Australia as early as July, instead of the previously anticipated August. Currently, traders estimate a 97% probability that the Reserve Bank will reduce its cash rate from 3.85% by 25 basis points at its meeting on July 8. Future rate cuts are expected to bring the rate down to 2.85%, a level considered below most estimates of the neutral rate.