Australian 10-Year Bond Yields Hover Below 15-Year Highs

By James Glynn

SYDNEY--Australian 10-year bond yields continue to hover just below their highest levels in more that 15 years, amid concerns about the global bear market for bonds and heightened concerns that tensions in the Middle East could ratchet higher quickly.

The yield on the Australian government 10-year bond was hovering around 5.36% in Asia on Friday, just below the 5.4322% threshold, which if exceeded would achieve a fresh high since May 2011.

With not much domestic data due next week, global trends will dictate the direction of Australian yields, traders said.

Market analysts are assessing the Pentagon's decision to send a third aircraft carrier group to the Middle East and add up to 10,000 troops to the region.

The decision points to "a re-escalation in the war...oil prices could have another leg higher," said Shane Oliver, chief economist at AMP.

Bonds are oversold and yields have retreated, although they are likely to trend higher as investors demand better returns given risks around inflation, interest-rate increases, high public debt levels and erratic U.S. policy making, he added.

"So the Australian yield looks likely to push above the 2011 high at some point just as we saw U.S. yields go to early 2000 levels," Oliver said.

Recent strength in U.S. economic data is also likely to keep some upward pressure on bond yields in general, said Jack Chambers, debt strategist at ANZ.

The release of U.S. payrolls data ahead of the weekend could be a trigger for further selling of Treasurys, he added.

"If there is strength I think yields have room to move higher again," Chambers said. "This week's U.S. data has shown signs of acceleration in U.S. activity and the revisions have painted an even stronger picture about the past."

With few domestic data points next week, Treasurys could dictate moves in the Australian bond market, he added.

"And if there is an escalation of the Middle East conflict and oil prices move higher, I'd expect Australian yields to move higher with this," Chambers added.

Money markets are also under-pricing the risk that the Reserve Bank of Australia raises interest rates again in November, he said.

Third-quarter inflation data are likely to beat the central bank's forecasts, Chambers said, framing the case for another rise in interest rates.

The RBA has raised interest rates four times since the start of the year, and money market pricing suggests traders are in two minds about whether the central bank will need to tighten the policy screws again.

But global trends are set to dictate.

"The bond vigilantes are back. The past week saw another rise in bond yields. Bonds have been oversold for several weeks now but their continued selloff is a sign of the strength in the bear market that is now engulfing them," said AMP's Oliver.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 02, 2026 01:47 ET (05:47 GMT)