Australian government bond yields have increased following the release of a strong jobs report, which has bolstered expectations that the Reserve Bank of Australia (RBA) will implement another interest rate hike. The positive employment data has led investors to believe that the RBA is more likely to continue its tightening monetary policy in an effort to combat inflation. This shift in sentiment has had a direct impact on the bond market.
The three-year bond yield experienced a rise of 4 basis points, reaching 4.31 per cent. Simultaneously, the 10-year return also saw an increase, adding 3 basis points to reach 4.76 per cent. The movement in bond futures further reflected the changing interest rate expectations, with three-year bond futures declining by 3 basis points as traders increased their bets on an impending interest rate rise.
Money market indicators now suggest a 78 per cent probability of a rate hike in May, a notable increase from the 70 per cent probability assessed prior to the release of the jobs data. Looking ahead, the implied probability of a rate increase in June has risen to 95 per cent, indicating a strong consensus among investors that further tightening is on the horizon.
In currency markets, the Australian dollar experienced a slight increase, moving from US70.40¢ to US70.47¢. The Australian dollar has demonstrated considerable strength this year, with an overall increase of 5.6 per cent.
