FX.co ★ Australia 10Y Yield Stays Near 2-Week Lows

Australia’s 10-year government bond yield traded above 4.9%, holding near a two-week low as investors weighed ongoing diplomatic efforts in the Middle East and a cautious stance from the Reserve Bank of Australia. The central bank has already implemented three rate hikes this year, and Governor Michele Bullock noted that tighter policy is beginning to feed through to the broader economy. Even so, she stressed that inflation remains uncomfortably high and that policymakers will stay vigilant to the risk of entrenched price pressures. Markets widely expect the RBA to keep rates unchanged in June, while assigning roughly a 50% probability to another increase in August and fully pricing in at least one additional move by December. Attention now turns to further signals on the policy path, with Deputy Governor Andrew Hauser scheduled to speak later today. At the same time, prospects for a ceasefire in the Middle East remain uncertain amid mixed messages from Washington and Tehran, and the outlook is further clouded by Iran-backed Hezbollah’s rejection of a US-brokered truce proposal in Lebanon.