FX.co ★ Australia 10Y Yield Eases to 2-Week Low

Australia’s 10-year government bond yield fell back below 5%, retreating from multi-year highs to its lowest level in two weeks, as investors rotated into sovereign debt following a sharp selloff driven by oil price gains and geopolitical inflation concerns. The pullback came as markets reassessed the implications of tensions in the Middle East for global growth and inflation, with hopes of de-escalation tempering expectations of sustained price pressures.

US President Donald Trump indicated that American military operations against Iran could be wound down within two to three weeks, adding that Tehran would not be required to agree to a formal deal as a precondition for easing the conflict. Nonetheless, uncertainty remained elevated amid reports that the US may send additional naval assets to the region, while ongoing risks around the Strait of Hormuz continued to underpin oil prices due to fears of prolonged supply disruptions.

The Reserve Bank of Australia, which lifted its benchmark interest rate to 4.10% in March, remains a key focus for markets. Investors are currently assigning roughly a 65% probability to another rate increase at the May meeting, although expectations for the terminal rate have moderated slightly.