Australia’s 10-year government bond yield jumped to around 4.71%, the highest since mid-November 2024, tracking a surge in US bond yields following a stronger-than-expected US payrolls report, reinforcing expectations of a slower pace of rate cuts by the Federal Reserve. Domestically, Melbourne Institute's Monthly Inflation Gauge showed a 0.6% month-on-month increase in December, up sharply from 0.2% in November and the highest level since December 2023. Still, markets are pricing in a 75% chance of a 25bps rate cut next month, as the Reserve Bank of Australia expressed growing confidence in easing inflation. Recent headline inflation ticked up to 2.3% in November from 2.1%, but remained within the policymakers’ 2-3% target range for the fourth consecutive month.
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