Australia’s 10-year government bond yield traded around 4.77%, near its highest level in over two years, as investors increasingly priced in the risk of renewed policy tightening. The RBA meeting minutes showed policymakers were less confident that monetary policy remains sufficiently restrictive, amid growing concern that inflation pressures could prove more persistent than previously expected. Board members discussed the conditions under which interest rates may need to rise again in 2026 should upside inflation risks crystallize, while stressing that any future moves would remain data dependent. Markets have fully priced in a rate hike in the first half of 2026 and continue to assign a high probability to an additional move by year-end. Several major banks have brought forward forecasts for earlier tightening, citing excess demand, a tight labor market and weak productivity growth. The Australian 10-year yield is on track for an annual gain of around 9% in 2025.
