FX.co ★ Australia 10Y Yield Holds at 5-Week Top

Australia’s 10-year government bond yield hovered near 5.1%, a five-week high, as markets sharply increased bets on an imminent interest rate hike. Expectations for tighter policy strengthened after July inflation came in hotter than forecast and household spending rose 1.1% in the month, signaling resilient domestic demand despite elevated borrowing costs.

The RBA has already raised rates three times this year and officials have cautioned that further tightening remains on the table. The stronger data prompted several major banks to upgrade their policy projections: NAB now expects the cash rate to rise to 4.6% next month, while CBA and ANZ see the next move in November but concede the risk of an earlier hike.

Market pricing now implies roughly a 50% probability of an increase at the RBA’s September meeting, up from about 17% previously, and a November hike is fully priced in. Attention is turning to Q2 GDP and upcoming labour market releases for additional guidance on the policy outlook.