Australian bond yields have surged to multi-month highs, mirroring a global rally triggered by indications of a potential interest rate increase from Japan’s central bank. The surge comes amid growing expectations that the Reserve Bank of Australia (RBA) may also consider tightening monetary policy in the near future.
The policy-sensitive three-year Australian government bond rate reached 3.93 per cent, marking its highest level since February. Simultaneously, the 10-year yield climbed to 4.62 per cent, a level not seen since January. These movements reflect broader market sentiment and anticipation of potential shifts in monetary policy both domestically and internationally.
The money futures market is reflecting the bond yield movements, with traders now pricing in a 70 per cent probability that the Reserve Bank of Australia will raise the cash rate late next year. This probability has been steadily increasing following last week’s higher-than-expected inflation report, adding further pressure on bond yields.
The global bond market experienced similar pressures, with Japan’s 10-year yield reaching its highest level since 2008 after Bank of Japan Governor Kazuo Ueda hinted at a possible rate hike. Japan’s two-year borrowing costs also climbed above 1 per cent for the first time in 17 years. Meanwhile, the Australian dollar remained steady, trading at US65.42¢.
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