Inflation Risk Back in Focus

• Middle East headlines kept markets defensive. Brent pushed back above US$106/bbl as Strait of Hormuz concerns intensified, reinforcing the risk that energy disruption keeps central banks cautious for longer.
• US bond yields moved higher, reflecting inflation premium rather than growth optimism. US 10-year yields briefly reached 4.35% as higher oil prices reinforced the risk of a longer Fed pause.
• Australian 10-year futures yields traded up to 5.04%, with markets now pricing an 75% chance of an RBA hike in May and more than a full hike by June.
• Australia’s composite PMI returned to expansion at 50.1, while cost and selling price inflation rose to 3½-year highs; globally, manufacturing improved but European services weakness suggests higher energy costs may be starting to bite.