Australia’s 10-year bond yield dropped to an all-time low after U.S. payrolls grew at the slowest pace in almost six years, slimming the chances the Federal Reserve will increase interest rates in the coming months.
The 10-year yield fell as low as 2.15 percent on Monday in Sydney, a record based on data compiled by Bloomberg going back to 1969. On Friday, the two-year U.S. Treasury yield fell the most since September and the 10-year yield declined 10 basis points as market-implied probability of a July rate increase halved to 27 percent.
Bonds are rallying around the world as investors scale back forecasts for when the Fed will raise rates. Australia’s debt is also drawing demand as signs of slowing growth in China, its biggest trading partner, add to the possibility the Reserve Bank of Australia will cut rates to support the economy.
“In the past year, the market has been bitten more than once,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Now, even if Fed speakers keep drumming up expectations of more than one rate hike for 2016, we suspect the market will be reluctant to follow until the data ratifies this view.”
Ten-year yields have fallen 56 basis points in the U.S. in 2016, while tumbling about 56 points in Germany, 40 in Japan and 72 in Australia. The Aussie benchmark closed at 2.16 percent.