AUSTRALIA’S bond yields dropped to a 13-month low amid growing speculation that the nation’s Reserve Bank of Australia (RBA) is inching closer to the start of interest-rate cuts.
The benchmark 10-year yield fell as much as five basis points to 3.88 per cent, the lowest since July 2023. The policy-sensitive three-year yield also declined five basis points.
Bond investors are shrugging off a relatively hawkish stance from the RBA, at least compared to peers. The central bank kept interest rates at a 12-year high earlier this month and ruled out a rate cut in the next six months, splitting with global counterparts as it waits for inflation to abate.
Bets on RBA easing mounted after slowing inflation allowed the Reserve Bank of New Zealand (RBNZ) to lower the official cash rate on Wednesday (Aug 14). Expectations that the Federal Reserve will slash interest rates as soon as next month also opened up the room for other major countries to loosen policies.
“Investors are reading through to Australia a combination of the RBNZ’s more-dovish-than-expected turn yesterday, the softer inflation data in the US,” said Kenneth Crompton, senior fixed income strategist at National Australia Bank in Sydney.
Now, investors’ focus is shifting to Australia’s jobs report due later Thursday to see if the labour market has loosened, a move that may also potentially boost the case for a rate cut. BLOOMBERG
