The Reserve Bank of Australia raised its cash rate to a 15-year high of 4.60%, pulling Australian bond yields back from a 2011-era peak. U.S. Treasury yields, meanwhile, held near multi-decade highs as hawkish Fed commentary and surging crude oil prices kept pressure on global debt markets.
The 10-year Australian government bond yield fell to 5.377% on Tuesday, its sharpest single-day drop in nearly two months. The move gave investors a breather after Australian borrowing costs touched their highest levels since 2011 in the previous session.
RBA delivers fourth hike of the year
The pullback followed the Reserve Bank of Australia raising its cash rate by 25 basis points to 4.60%, a 15-year high. The increase marked the central bank's fourth rate hike this year. Persistent domestic cost pressures and global energy shocks forced policymakers to act.
Treasury yields hold near multi-decade highs
Across the Pacific, the U.S. 10-year Treasury yield held at 5.221%, hovering close to its highest level since July 2007. The 30-year Treasury yield sat at 5.538%, consolidating around its highest level since 2004, while the two-year yield held near 4.914%, its elevated level since May 2024.
Yields firmed after President Donald Trump's rejection of an Iranian ceasefire proposal aimed at unblocking the Strait of Hormuz sent crude oil past $106 a barrel, sharpening fears of a sustained cost-push inflation spike.
Fed officials reinforce hawkish outlook
Federal Reserve Governor Lisa Cook warned that inflation pressures are likely to persist in the coming months, citing demand from the artificial intelligence buildout and elevated global crude oil prices as structural drivers. Her comments align with hawkish guidance from regional Fed presidents, and money markets now price in a nearly 70% probability of another 25-basis-point rate increase at the Fed's October meeting.
Traders now turn to Wednesday's August Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, followed by Friday's September nonfarm payrolls report. Fixed-income desks also await the August JOLTS print due later in the session, plus remarks from Fed Governors Michelle Bowman and Michael Barr, Chicago Fed President Austan Goolsbee, and Bank of England policymaker Catherine Mann.
Firm prints across the releases are expected to solidify Fed rate-hike expectations, keeping global bond yields under pressure heading into the final quarter.
Source: Investing.com
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