Australia’s 10-year government bond yield climbed above 5.4%, approaching its highest level since mid-2011, mirroring the rise in US Treasury yields amid persistent, energy-driven inflation concerns. Yields on 10- and 30-year US Treasuries traded near highs last seen in 2002, as elevated oil prices continue to fuel inflation risks and reinforce expectations of tighter monetary policy.
In Australia, markets scaled back the probability of a November interest rate hike by the Reserve Bank of Australia to 20%, down from 36%, after August inflation data came in slightly below expectations. Investors now see the next rate increase as more likely in March than in February. Even so, core inflation remains above the RBA’s 2–3% target range, a key factor behind the central bank’s decision to raise the cash rate to a 15-year high of 4.60% in September.
Sentiment was further pressured by weaker trade figures, as Australia’s trade surplus narrowed to its smallest level in three months, adding to concerns about the domestic economic outlook.