As Australian Inflation Rises, Australian Treasury Bond Yields Follow Their Global Peers to Grind Higher

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Australia’s bond markets have continued to witness buying activity at the start of the week as traders and investors prepare for the release of key inflation figures from Australia.

The Australian Bureau of Statistics is scheduled to release its Consumer Price Index (CPI) data for February on Wednesday, which should provide a better indication of inflationary forces in the country.

Australia’s 10-year Treasury bond yields have seen a two-day recovery, rising from their lowest levels since August 2022 on Friday. Benchmark 10-year Australia Treasury bond yields currently weigh around 3.53%, firmly in line with global peers.

According to Anil Panchal, finance writer, “The seasonally adjusted Retail Sales growth for February came in at 0.2% versus 0.4% market forecasts and 1.9% prior.”

Investors’ focus has now shifted to this week’s CPI figures, which could give more insight into the current inflationary environment in the Australian economy. If the CPI data shows higher-than-expected inflation, it could impact Treasury yields and send them even higher.

Analysts remain cautiously optimistic about the upcoming results after recent Reserve Bank of Australia (RBA) minutes revealed ongoing concerns regarding weak consumer spending and low business investment despite recent signs of improvement across other sectors, such as housing and construction.

Australian bond traders are keeping a close eye on the release of the nation’s Consumer Price Index (CPI) figures for February, which is expected to come in at 7.1% YoY compared to 7.4% in January. This follows the softer-than-expected Retail Sales data released earlier this month.

The Reserve Bank of Australia (RBA) has indicated that there may be a pause in its rate hike trajectory following weaker consumer spending and business investment figures, making investors cautious as they await further clarity on inflationary pressures in the economy.

The Australian bond market has been driven in recent weeks by expectations that global central banks will continue with their easing measures as they attempt to revive their respective economies, which have been hit hard by the coronavirus pandemic and related lockdowns in many countries around the world.

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