Australian 10-Year Bonds

Australian bonds reversed most of Fridays sharp fall on Monday which we found interesting on two  fronts:

• Firstly, while 10-year bond yields remained around 5%, and with credit markets pricing in a  ~90% chance of another RBA rate hike in 2026, the ASX200 was capable of surging towards 8900.
• Secondly, as we touched on earlier, June’s CPI inflation data is due on Thursday, following closely on the heels of last week’s strong employment data, yet bonds felt like they wanted to rally.

Our preferred scenario is the 10s trade between 4% and 5% into Christmas, a bullish backdrop for stocks if we’re correct.

• We feel bond traders are too hawkish “if/when” we get a lasting resolution around the Strait of Hormuz.