Australia’s 10-year government bond yield hovered around 4.79% on Thursday, its highest level in three weeks, as investors continued to reassess the Reserve Bank of Australia’s interest rate outlook. Fresh data showed household consumption rose 0.3% month-on-month in January, partially reversing a 0.5% decline in December but missing forecasts for a 0.4% gain, underscoring an uneven recovery in spending. That followed stronger-than-expected GDP data for the fourth quarter, although the underlying details continued to point to softness in consumer demand.
Money markets currently assign only a small probability to a rate hike later this month but fully price in an increase by May, reflecting a still-tight labor market and stubborn inflation. At the same time, investors are monitoring the potential growth and inflation implications of escalating conflict in the Middle East. RBA Governor Michele Bullock said the central bank remains “very alert” to such risks and stands ready to tighten policy further if necessary.
