04.08.202602:10:40UTC+00AUS 10Y Yield Holds Below 9-Week High

Australia’s 10-year government bond yield held near 4.9%, extending its recent pullback and remaining below the nine-week high reached on July 24, as investors continued to weigh the policy outlook ahead of next week’s Reserve Bank meeting.

The latest data showed household spending rose 0.8% in June, sharply above the 0.2% consensus forecast, driven by another solid gain in discretionary outlays. On an annual basis, spending growth accelerated to 6.0%, also topping expectations. These figures reinforce the central bank’s assessment that consumer activity remains resilient despite subdued sentiment.

Even so, softer recent inflation prints and signs of cooling in the housing market have strengthened expectations that the RBA will keep its cash rate on hold at 4.35% next week. Markets are also assigning only a low probability to a rate increase in September, while pricing in roughly a 50% chance of a move in November, contingent on third-quarter inflation surprising to the upside.

Investors now turn to the final PMI readings and this week’s trade balance data for additional insight into the underlying health of the Australian economy.