Australia’s 10-year bond yield drops below RBA’s cash rate of 1.5%

The yield on Australia’s 10-year government bond fell below the Reserve Bank of Australia’s cash rate of 1.5% on Monday.

The benchmark yield hit a record low of 1.496%, having topped out at 2.79% in early November. 

Clearly, the markets have priced in dovish RBA expectations over the last six months. 

The central bank is expected to cut interest rates by 25 basis points to a new record low of 1.25% next month and is widely expected to deliver another rate cut in the second half of this year. 

The market is fully priced in for two rate cuts. Westpac, however, was out on the wires last week with its latest forecast calling for three rate hikes this year. The market is yet to price in the possibility of a third rate cut.