|

Australia’s 10-year Treasury yields drop to 14-week low after RBA’s rate hike

  • Australia’s bond yields track US counterparts to refresh multi-day low.
  • RBA’s rate hike fails to impress Aussie bulls amid indecision over the next move.
  • Fears of recession, headlines surrounding China add strength to the risk-off mood.

Australian bond markets cheer the Reserve Bank of Australia’s (RBA) Interest Rate Decision while refreshing the 3.5-month low during early Tuesday morning in Europe. That said, the benchmark 10-year Treasury yields slump to 3.00%, the lowest levels since April 27 by press time.

The RBA matched the market’s expectations of announcing 50 basis points (bps) rate hike, the fourth in 2022, while inflating the benchmark rate to 1.85%. It’s worth noting, however, that the indecision over the next move of the Aussie central bank, amid recession fears and as the rate approaches the policymakers’ “neutral rate of 2.5%”, appear to drown the Aussie treasury yields. The same could be linked to the RBA Statement that says that the central bank is not on the pre-set path in normalizing rates.

Earlier in the day, firmer prints of the Australia Building Permits for June contrasted with the downbeat Aussie Home Loans and Investment Lending for Homes for the said month to weigh on the Australian markets. That said, the ASX 200 printed mild losses around 6,983 level at the latest, down 0.20% by the press time.

It’s worth noting that US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment also weigh on the market sentiment and the Aussie treasury yields. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea. Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

On a broader front, the recently disappointing US PMIs tracked the last week’s US Gross Domestic Product (GDP) to portray economic fears. Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

Moving on, Friday’s RBA Rate Statement will be crucial as traders remain unconvinced of the Aussie central bank’s latest moves. Additionally, monthly prints of the US employment data, up for publishing on Friday, will also be crucial to watch for clear directions.

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.

Crypto Today: Bitcoin, Ethereum, XRP pare gains despite increasing hopes of upcoming Fed rate cut

Bitcoin is steadying above $91,000 at the time of writing on Friday. Ethereum remains above $3,100, reflecting positive sentiment ahead of the Federal Reserve's (Fed) monetary policy meeting on December 10.

Week ahead – Rate cut or market shock? The Fed decides

Fed rate cut widely expected; dot plot and overall meeting rhetoric also matter. Risk appetite is supported by Fed rate cut expectations; cryptos show signs of life. RBA, BoC and SNB also meet; chances of surprises are relatively low.

Ripple faces persistent bear risks, shrugging off ETF inflows

Ripple is extending its decline for the second consecutive day, trading at $2.06 at the time of writing on Friday. Sentiment surrounding the cross-border remittance token continues to lag despite steady inflows into XRP spot ETFs.