FX.co ★ AUS 10Y Yield Falls on Soft Jobs Report

Australia’s 10-year government bond yield fell to around 5.2%, a five-week low, after a weaker-than-expected labor market report led traders to scale back bets on further interest rate hikes. The economy lost 39,300 jobs, the largest monthly decline since February last year, defying expectations for a 20,000 increase. The unemployment rate held at a five-year high of 4.7%, above the 4.6% consensus forecast, while the previous month’s rate was revised up from an initially reported 4.6%.

The data indicate that the labor market may be starting to soften after the Reserve Bank of Australia lifted its cash rate by a cumulative 1 percentage point to 4.60% this year in an effort to curb inflation—one of the most aggressive tightening cycles among advanced economies. Market pricing now implies less than a 10% probability of a rate hike in November, down from 35% previously, while the odds of a December move have declined to 30% from 60%. The highest likelihood is now attached to a hike in May 2027, which markets assign an 80% probability.

Investors are now focused on the upcoming Q3 CPI release later this month for additional guidance on the future path of monetary policy.