FX.co ★ Australia 10-Year Yield Hits 2-Week High

Australia's 10-year government bond yield has risen to approximately 4.77%, reaching its highest level in two weeks. This increase is bolstered by potential tightening of monetary policy by the Reserve Bank of Australia (RBA) and a shift in investment away from US Treasuries. According to the latest report from the Melbourne Institute, Australia's monthly inflation rose by 1% in December, marking the quickest increase in the past two years. Robust household spending has also highlighted sustained demand, presenting ongoing inflationary challenges for the RBA. Current market expectations suggest a 25% probability of an interest rate hike in February and a 70% likelihood in May. Investors are keenly observing this week’s labor market report for further direction. Additionally, there is considerable interest in Australia's newly issued 2037 Treasury bond, with demand exceeding previous sales even before Wednesday’s pricing. On another front, fresh US tariff threats targeting Europe over Greenland have revived a "sell America" mood among investors, steering them towards alternative asset classes.