AUS 10Y Yield Falls Ahead of RBA Decision

Australia’s 10-year government bond yield fell to around 4.35%, slightly retreating from a three-week high, tracking declines in US Treasuries amid government shutdown risks, while focus remained on the upcoming RBA decision. Australia also posted a smaller-than-expected FY2024/25 budget deficit, which eased pressure on government borrowing and added downward pressure on yields. Still, moves were limited as investors awaited the RBA policy decision this week, with markets largely expecting the central bank to keep rates steady at 3.60% but anticipating a cut in November. However, diverging inflation signals, with Q2 showing a quarterly slowdown but August data pointing to a monthly acceleration, have raised the risk of stronger price pressures in Q3, leaving the policy path uncertain. This reaffirmed the cautious, data-driven stance of Governor Michele Bullock, who has consistently emphasized the bank’s commitment to its 2–3% inflation target.