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

Australia’s 10-year government bond yield hovered around 5.2%, near multi-week lows, as investors continued to reassess the monetary policy outlook. RBA Deputy Governor Andrew Hauser said tighter policy was having an impact, but warned that the inflation outlook remained “materially worse,” in part because of elevated oil prices. He emphasized the importance of keeping inflation expectations anchored ahead of the RBA’s November 3 policy meeting, at which officials will decide whether to raise interest rates for a fifth time this year.

At the same time, Hauser acknowledged that higher borrowing costs and fuel prices were weighing on economic activity. Following his remarks, markets increased the implied probability of a November rate hike to 44%, up from 30% at the start of the week, while the likelihood of a December move rose to 64%. Attention now turns to next week’s third-quarter inflation report. Core inflation is forecast to climb 1.0% quarter-on-quarter, from 0.9% previously, leaving the annual rate at 3.5%—still well above the RBA’s target range.