FX.co ★ Australia 10Y Yield Eases Despite Strong GDP Data

Australia’s 10-year government bond yield declined to 4.73%, pulling back from a more-than-one-week high, even after a stronger-than-expected GDP release. The economy expanded by 0.8% in the December quarter, beating the consensus forecast of 0.6%. On an annual basis, growth reached 2.6%, above expectations of 2.2% and the fastest pace in nearly three years.

Although the data confirm solid economic momentum, they did not provide a decisive case for an additional rate hike later this month. Yields were also weighed down by mounting global risk aversion, as escalating tensions in the Middle East prompted investors to shift into safe-haven assets. Markets are closely watching how these developments could affect both growth and inflation.

On Tuesday, Governor Michele Bullock noted that the central bank remains “very alert” to such risks and stands ready to tighten policy further if warranted. Money markets currently imply about a 30% probability of a rate increase this month, while a hike is fully priced in for May.