Australia’s 10-year government bond yield rose to around 4.23% as investors digested fresh PMI survey data. May figures showed that the private sector expanded at its second-fastest pace in ten months, with services growth hitting a three-month high, while manufacturing growth remained steady.
The upbeat PMI figures offered some relief regarding Australia’s economic resilience following a string of weak data that had strengthened short-term rate cut expectations. Meanwhile, yields may face downward pressure from rising geopolitical risks after the US launched airstrikes on three Iranian nuclear sites over the weekend, signaling its direct involvement in Israel’s conflict with Iran. However, the situation has also driven oil prices higher, and as a commodity exporter, Australia could face renewed inflationary pressures, potentially pushing yields higher as markets reassess the interest rate outlook.
