FX.co ★ AUS 10Y Yield Hits Over 3-Month Low

Australia’s 10-year government bond yield fell below 4.8%, its lowest level in more than three months, after an interim peace deal between the US and Iran eased global inflation worries and reinforced expectations that the Reserve Bank of Australia will leave interest rates unchanged this week. A run of softer economic data, from GDP to housing prices, has strengthened the view that the central bank’s three rate hikes earlier this year are now weighing more clearly on activity.

Market pricing now implies virtually no chance of a move at the June meeting, while the probability of an August hike has dropped sharply to around 35%, from more than 80% a month earlier. The May CPI report, due on June 24, will be crucial as policymakers seek clearer evidence on whether underlying price pressures remain elevated.

At the same time, reports that Washington and Tehran have reached a peace agreement pushed oil prices lower, further easing inflation and rate-hike expectations. The deal, expected to be signed in Switzerland on June 19, is said to include sanctions relief for Iran, the lifting of blockades, and the dismantling of Tehran’s nuclear program.