26.05.202602:27:36UTC+00Australia 10Y Yield Rises Ahead of CPI

Australia’s 10-year government bond yield climbed back above 4.9%, rebounding from a six-week low as renewed US strikes on Iran undermined hopes for a peace deal and kept geopolitical risk elevated. Investors also turned cautious ahead of key domestic inflation data.

April CPI, due this week, is expected to show consumer prices rising 0.6% month-on-month, with annual inflation easing slightly to 4.4% from 4.6%. The moderation is largely attributed to a government fuel tax break. In contrast, the Reserve Bank of Australia’s preferred core gauge, the trimmed mean, is projected to edge up to 3.4% year-on-year from 3.3%, highlighting higher transport and logistics costs across a wide range of sectors.

A stronger inflation print could bolster the case for further monetary tightening. Even so, futures markets currently price only a 10%–12% probability of a 25-basis-point rate hike in June, while the implied odds of an increase in August are close to 50%.

In commodity markets, oil prices moved higher after reports of new military strikes in Iran dimmed expectations for an interim agreement between Tehran and Washington that would reopen the Strait of Hormuz.