Australia’s 10-year government bond yield fell to 4.73%, retreating from an over one-week high, despite a stronger-than-expected GDP report. The economy grew 0.8% in the December quarter, faster than the estimated 0.6%. Annual growth came in at 2.6%, also surpassing forecasts of 2.2% and marking the strongest performance in nearly three years. While the report confirms solid economic momentum, it failed to firmly justify a follow up hike later this month. Yields were also pressured by rising global risk aversion, as escalating tensions in the Middle East drove investors toward safe-haven assets. Markets are closely monitoring the potential impact of these tensions on growth and inflation. On Tuesday, Governor Michele Bullock said the central bank remains “very alert” to such risks and ready to respond with tighter monetary policy if needed. Traders currently assign a 30% chance of a rate hike later this month, while a move is fully priced in for May.
