FX.co ★ AUS 10Y Yield Trades Near Multi-Week Highs

Australia’s 10-year government bond yield traded above 4.9%, hovering near multi-week highs after the Reserve Bank of Australia’s latest communications reinforced a hawkish policy stance. RBA Assistant Governor Christopher Kent said earlier rate hikes were having the intended effect, with tighter monetary conditions dampening consumer spending and broader economic activity. He highlighted a slowdown in housing credit growth, a marked decline in new home lending, and noted that overall financial conditions remained somewhat restrictive.

The central bank left the cash rate unchanged at 4.35% this week, after a total of 75 basis points of increases since February. However, Governor Michele Bullock cautioned that policymakers remained concerned inflation might not ease as much or as quickly as hoped, and reiterated that they were prepared to raise rates again if necessary. Money markets are pricing in roughly a 75% probability of a hike to 4.60% by December, which investors largely view as the likely endpoint of the current tightening cycle. Focus now turns to Governor Bullock’s testimony before parliament on Friday.