Australian Markets Poised for Gain Amid Bond Volatility Concerns

The Australian share market is expected to open higher on Monday, building on the gains from the previous week. Futures suggest the S&P/ASX 200 will rise by 0.3%. This follows a strong performance on Wall Street, where the market climbed 0.7% after softer-than-anticipated US jobs data reduced expectations of a Federal Reserve rate hike.

However, investors remain cautious due to ongoing volatility in the global bond market. The yield on 10-year US Treasury bonds briefly hit 5.34%, the highest level since 2002, while Australia’s 10-year bond yields approached 5.40%, a peak not seen since 2011. These rising yields are partly driven by surging Brent crude prices, which neared $103 per barrel, raising concerns about persistent inflation.

Matthew Haupt of Wilson Asset Management highlighted the delicate balance in the current market, noting that bond market turbulence often spills over into equities. Despite this, equity markets have shown resilience, with Wall Street up over 15% in six months, while the ASX 200 has remained flat. Officials have expressed mixed views, with Australian Treasurer Jim Chalmers warning of increased budget pressure from rising borrowing costs, while US Treasury Secretary Scott Bessent downplayed concerns, attributing high yields to strong US economic fundamentals.

Betashares chief economist David Bassanese pointed out that equity markets are trying to overlook downward valuation pressures, supported by robust global economic activity, solid corporate earnings, and investments in AI. Traders are also keeping an eye on the Federal Reserve’s September policy meeting minutes for hints on future rate decisions, contrasting with the Reserve Bank of Australia’s recent fourth cash rate hike this year to 4.6%.