The Reserve Bank of Australia’s recent rate hike was largely priced in by markets, but stronger employment and inflation data have increased expectations of another rise within the next two to six months. The forward interest rate curve reflects this outlook, with short-term rates moving into the 4% range while longer dated government bond yields remain relatively flat.
Window notes investors have generally shortened duration or shifted from fixed-rate bonds into floating-rate securities to capture higher short-term yields. However, higher long-term yields, including recent 20-year bank issuance around 6.4%, are beginning to attract attention from investors willing to accept some volatility in exchange for locking in higher income over time.
