FX.co ★ AUS 10Y Yield Falls Ahead of RBA Decision

Australia's 10-year government bond yield decreased to approximately 4.35%, pulling back slightly from a recent three-week high. This movement tracked declines in US Treasuries, influenced by potential government shutdown risks. The spotlight, however, remained on the forthcoming decision from the Reserve Bank of Australia (RBA). Additionally, Australia announced a narrower-than-anticipated budget deficit for fiscal year 2024/25, reducing pressure on government borrowing and consequently exerting downward pressure on yields. Despite these developments, market moves were subdued as investors awaited the RBA's policy announcement this week. While the general market consensus expects the central bank to maintain rates at 3.60%, there is anticipation for a rate cut in November. Nevertheless, conflicting inflation indicators—showing a slowdown in the second quarter but an acceleration in August—have increased concerns about potential price pressures in the third quarter, casting uncertainty over future policy direction. This reinforces the cautious and data-driven approach of Governor Michele Bullock, who has consistently underscored the bank’s dedication to its 2-3% inflation target.