| Close | Previous Close | Change | |
|---|---|---|---|
| Australian 3-year bond (%) | 3.925 | 3.899 | 0.026 |
| Australian 10-year bond (%) | 4.615 | 4.562 | 0.053 |
| Australian 30-year bond (%) | 5.183 | 5.129 | 0.054 |
| United States 2-year bond (%) | 3.533 | 3.504 | 0.029 |
| United States 10-year bond (%) | 4.087 | 4.046 | 0.041 |
| United States 30-year bond (%) | 4.7328 | 4.706 | 0.0268 |
Overview of the Australian Bond Market
Australian government bond yields climbed on December 3, 2025, extending recent rises as softer GDP failed to revive rate-cut bets, with markets signalling the next RBA move as a hike amid resilient growth and sticky inflation. The two-year yield rose 4 basis points to 3.88%, while the 10-year held flat at 4.61% after touching 4.65%—up sharply from October lows—and the 15-year added 1 basis point to 4.90%. The moves reflect bond market “hiking” rates by over 50 basis points in months, with 2-year yields now 30 basis points above the RBA’s 3.60% cash rate.
September GDP at 0.4% quarterly missed forecasts but annual 2.1% topped RBA’s 2026 view, buoyed by June revisions and net exports. Consumer lag persists, sensitive to rates, yet overall resilience—best annual in two years—dampens easing hopes. AMP’s My Bui flags consumer concerns, but bond traders focus on inflation risks, amplified by global tariff uncertainties.
US data influenced sentiment: ADP payroll miss and ISM services reinforced Fed cut odds, sinking the dollar and lifting AUD/USD 0.55% to 0.6599, breaking resistances. This supported commodities, with copper up 2.8% on supply squeezes, aiding Aussie miners. Yet domestically, yields’ ascent competes with stocks, offering risk-free 4% short-term and 4.7% long-term versus equities’ similar yields with volatility.
Macro parallels with US private credit trends apply: Australia’s shift to non-bank lending enhances resilience, reducing bank concentration. As Rowan notes, private credit’s growth—mostly investment-grade—offers better risk/reward, with myths on opacity debunked by diligence. Isolated issues don’t signal systemic risk, bolstering financial stability amid industrial renaissance.
Thursday’s trade balance (AUD 3.938 billion forecast) and household spending (+0.6% monthly) could sway yields; stronger data may push them higher. With US PCE Friday eyed for global cues, Aussie bonds face pressure if disinflation stalls. Strategists see diversification value, but high valuations and tariff bites warrant caution, with liquidity building in stables indicating sidelined capital awaiting clarity.
Overview of the US Bond Market
Bond prices rose across the curve on December 3, 2025, pushing yields lower as weak jobs data amplified expectations for Federal Reserve easing, countering recent tariff-driven inflation fears. The two-year Treasury yield fell 12 basis points to 3.48%, it’s lowest since late October, while the 10-year dropped 5 basis points to 4.06% and the 30-year eased 4 basis points to 4.73%. The 2s-10s curve flattened marginally to +56.8 basis points, reflecting bets on near-term cuts amid a resilient but cooling economy.
The rally followed ADP’s report of a 32,000-payroll decline, underscoring labour market softening that could prompt the Fed to act at its December meeting, with swaps implying over 90% odds for a 25 basis-point reduction. ISM services data showed steady activity but a drop in prices paid, easing inflation concerns and supporting the case for policy accommodation. Treasury Secretary Scott Bessent highlighted the need for rate cuts given sectoral weaknesses, while voicing confidence in the outlook and Trump-era tariff legality, including potential extensions in US-China talks.
Macro headwinds persist, with tariff risks potentially fuelling supply squeezes—as seen in copper’s record rally—yet the shift of credit from banks to private markets, as noted in Apollo CEO Marc Rowan’s op-ed, has made the system more resilient. Private credit, at $40 trillion mostly investment-grade, reduces concentration risks post-Dodd-Frank, with investors favouring it for equity-like returns with less volatility. Isolated bankruptcies in leveraged lending don’t signal systemic issues, and myths around opacity and tradability are debunked by deep due diligence and active trading, like Apollo’s $6 billion in investment-grade credit this year.
JPMorgan’s client survey likely reflects trimmed long positions ahead of key data, though asset managers pared net longs by $23.5 million per basis point last week, per CFTC. Leveraged funds reduced shorts in the bond contract, signalling less bearish conviction. Dealers expect steady coupon auction sizes for August-October, aligning with April guidance, with 10-year and 5-year reopenings up $1 billion each.
The dollar index tumbled 0.50%—its steepest drop in nearly two months—breaking below its 55-day moving average, boosting risk assets and commodities like gold (down 0.21%) and copper (up 2.8%). With Friday’s PCE eyed for confirmation of stable inflation, bonds could extend gains if data aligns with disinflation, though high valuations and potential tariff bites temper optimism. Strategists see diversification appeal amid uneven fundamentals, with crypto’s rebound offering a sturdier foundation despite fragile sentiment.
