FX.co ★ Australia 10Y Yield Falls on Soft Jobs Data

Australia’s 10-year government bond yield fell back below 5%, hitting a one-week low after weaker-than-expected labor market data tempered expectations of further interest rate hikes by the RBA. Employment declined by 15,800 in July, erasing June’s upwardly revised gain of 80,300 and surprising economists who had forecast an increase of 15,000. This was the first monthly decline in employment since April. At the same time, the unemployment rate rose to 4.5%, exceeding both market forecasts and June’s 4.4%, and reaching its highest level in three months. In its latest projections, the central bank forecast the unemployment rate would climb to 4.8% by mid-2028 and hover around that level through the second half of the year, above the government’s 4.5% estimate. Although conditions remain relatively tight, Australia’s labor market is clearly showing signs of softening. The RBA has lifted the cash rate to 4.35% through three hikes earlier this year but has left policy unchanged at its June and August meetings as it evaluates the impact of earlier tightening on the broader economy.