Australia 10Y Bond Yield Hits 26-month High

Australia’s 10-year government bond yield fell to around 4.72%, moving back toward its four-week low, as markets assessed risks from renewed tariff tensions. President Donald Trump announced that global tariffs will rise from 10% to 15% after the Supreme Court struck down much of his earlier trade measures. Australian Trade Minister Don Farrell said Sunday he is coordinating with the Washington embassy to assess the impact and explore all options. Limiting further downside was a hawkish RBA outlook, with recent strong jobs data and elevated Q4 wage growth reinforced the central bank’s view that the economy can absorb tighter policy without layoffs, signaling ongoing labor-market tightness and sustained inflation pressures. This follows the RBA’s decision to hike earlier this month. Investors are now turning to January inflation data, due later this week for further guidance.

Australia’s 10-year government bond yield traded around 4.74%, holding above a four-week low after strong jobs data reinforced the Reserve Bank’s view that the economy can absorb tighter policy without triggering layoffs. The jobless rate held at 4.1% in January, below the 4.2% forecast, while employment rose by nearly 18,000, entirely in full-time positions, with the previous month’s hiring revised upward. This comes after annual wage growth remained elevated in Q4, signaling ongoing labor market tightness and highlighting the inflation pressures facing the RBA following this month’s rate hike. A flash PMI survey also showed a pickup in costs and selling prices, supporting a sticky inflation narrative. Markets now price a 76% chance of an RBA rate hike in May, with March nudging up to 28%, although most economists still expect rates to remain unchanged in March.

Australia’s 10-year government bond yield rose to around 4.72%, rebounding from an over one-month low, as wage data supported the case for further policy tightening. The wage price index rose 0.8% in the December quarter, the same as the previous period and matching expectations. Annual growth edged up to 3.4% from a revised 3.3%. This pointed to continued tightness in the labor market and persistent inflationary pressures. Minutes from the Reserve Bank of Australia’s latest meeting showed policymakers judged this month’s rate increase as necessary, noting that risks to inflation and employment had “shifted materially.” The minutes also emphasized that financial conditions were not yet restrictive enough to curb excess demand. Attention now turns to Thursday’s jobs report for further insights on the labor market conditions and the likely path of interest rates. Currently, traders are assigning a 60% chance to a follow up hike in May, with another move fully priced in by August.