FX.co ★ Australia 10Y Yield Rises from 7-Week Low

Australia’s 10-year government bond yield climbed toward 5.2%, rebounding from a recent seven-week low after hotter-than-expected inflation data strengthened expectations of a fifth interest rate increase this year. Monthly CPI rose 0.8% in September, the largest gain in six months and above the 0.7% consensus, while the annual rate accelerated to 4.3% from 4.0% in August, beating forecasts of 4.2% and marking its highest level since March.

Core inflation rose 0.3% on the month, in line with expectations, and the annual core rate ticked up to 3.6% from 3.5%, also matching forecasts. The rise in both headline and core measures pushed inflation further above the RBA’s 2–3% target band, reinforcing market bets on a rate hike at the central bank’s November 3 meeting.

The data came on the heels of comments from RBA Governor Michele Bullock earlier on Wednesday, in which she warned that upside risks to inflation were becoming evident and that price pressures were likely to exceed the central bank’s August projections. Following the release, traders raised the implied probability of a November rate increase to 78%, up from 70% before the inflation report.