Global Bond Selloff Continues

• The global bond selloff continues as oil surged more than 7% to US$108/bbl. The US 2yr rose 16bp to 4.59% and the 10yr 13bp to 4.96%, UK 10yr gilts were up 11bp to 5.38%, and the Australian 10yr jumped 10bp to 5.31%, pushing domestic reference rates higher, particularly in the medium term swaps.
• Markets were also hit by an underfulfilled Treasury buyback, with Bessent’s program purchasing $5.19bn against the $6bn maximum previously outlined.
• Overnight the ECB hiked 25bp, leaving the benchmark deposit rate at 2.50%, a “no brainer” and widely expected, while the latest US PPI at 0.4% for the month reinforced expectations of a Fed hike, around 70% for the next meeting and a full hike by October, as all eyes turn to the main CPI release later tonight.
• Domestically, pricing for an RBA hike has pushed up to around 80%, with the move in oil and the lift in reference rates adding to the inflation concerns the Board has repeatedly flagged as its key policy focus.