Australia’s government bond yield edged up to 4.71%, its highest since November 2023, as traders positioned themselves ahead of the Reserve Bank’s policy decision this week and braced for potentially hawkish guidance. Markets widely expect the RBA to hold the cash rate steady at 3.6% at its final meeting of the year. A string of strong data on inflation, economic growth, and household spending has led investors to abandon all thought of further monetary easing and wager on a rate hike as early as May. Attention will turn next to the country’s labour market report due on Thursday, which could provide additional insights into the strength of the economy. Meanwhile, the US Federal Reserve is anticipated to cut interest rates at its meeting this week. The yield spread over US Treasuries has widened sharply to around 60bps, from just 17bps last month, marking the largest premium since August 2022.
