FX.co ★ Australia 10Y Yield Retreats from 2011 Highs

Australia’s 10-year government bond yield slipped below 5.3%, retreating from its highest level since mid-2011 and mirroring a decline in global yields as easing fears over Middle East supply disruptions reduced inflation pressures. Oil prices pulled back after Saudi Arabia moved to restore flows through its East–West pipeline, while President Trump is scheduled to meet Gulf leaders next week.

Domestically, hawkish comments from the Reserve Bank of Australia’s top official reinforced expectations of further policy tightening. Governor Michele Bullock said upside inflation risks were emerging and warned that rising costs could entrench inflation for longer. Her comments follow a series of recent statements from senior RBA officials that inflation remains too high and must continue to moderate.

Money markets are now pricing in at least two additional rate hikes by the February meeting, assigning roughly an 87% probability that the first move will come on September 29. This marks a significant shift from early September, when traders had expected only one more increase.