Australian and US 10-Year Yields Converge at 5% as Fed and RBA Paths Split

Staff Writer

November 11, 2026

News

Australian and US 10-Year Yields Converge at 5% as Fed and RBA Paths Split — Image: Martin Kingsley from Melbourne, Australia / Wikimedia Commons, CC BY 2.0

Australian and US 10-year government bond yields have converged at about 5 per cent, as hot US inflation data pushed Treasury yields higher while soft domestic data reinforced expectations that the Reserve Bank of Australia has reached the peak of its tightening cycle.

At 7am AEDT on Wednesday, the US 10-year yield stood at 4.99 per cent and the Australian 10-year at 5.01 per cent, according to the ABC’s market snapshot, leaving the spread between the two benchmarks at just 2 basis points. The Australian dollar fell 0.9 per cent overnight to 68.63 US cents, the ABC reported.

Diverging policy paths

The narrow spread reflects central banks moving in different directions. In the US, October consumer prices rose 0.4 per cent and core prices 0.3 per cent, both above forecasts, and rate markets have fully priced a Federal Reserve rate rise at its December meeting, the ABC reported. The Fed’s target range is 3.75 to 4 per cent. Futures were pricing about three quarter-point increases by June, Investing.com reported, citing Bloomberg.

In Australia, the RBA lifted the cash rate by 25 basis points to 4.85 per cent on 3 November, but the 6–3 vote and the removal of its tightening bias suggested rates may have peaked, according to Trading Economics. It said markets were pricing about an 80 per cent chance of that, with roughly 30 basis points of easing by the end of next year.

Domestic data released on Tuesday supported that view. The Westpac–Melbourne Institute consumer sentiment index fell 2.7 per cent to 78.2 in November, with mortgage holder sentiment at a record low, while NAB’s October business survey showed conditions at their weakest since August 2020. Westpac expects the RBA to hold rates at its December meeting and does not expect a hike in February, investingLive reported.

A month of relative outperformance

Trading Economics data show the Australian 10-year yield has fallen about 33 basis points over the past month, compared with a decline of about 25 basis points in the US 10-year yield. Over 12 months, the Australian benchmark is about 60 basis points higher, while the US 10-year has risen about 86 basis points.

The US 10-year yield had dropped to a near two-month low of 4.84 per cent on 5 November amid a flight to safety, before climbing by about 10 basis points on Tuesday following the inflation report and comments from Fed officials, Trading Economics said. Governor Christopher Waller and Dallas Fed President Lorie Logan have both signalled support for further increases.

At the long end, the Australian 30-year yield was 5.46 per cent on 9 November, Trading Economics data show, well below the record 5.89 per cent reached in October.

Implications for investors

The spread between Australian and US yields is closely watched by offshore investors, who hold a significant share of Commonwealth government securities, and by Australian issuers weighing domestic against offshore funding. A narrow or negative spread reduces the outright yield pick-up for unhedged foreign buyers of Australian duration, although returns for hedged investors also depend on the relative cost of currency hedging, which is driven by short-term rate differentials.

The policy divergence also has implications for the shape of the Australian curve. If markets continue to price RBA easing while the Fed tightens, front-end Australian yields are likely to be most sensitive to domestic data, while the long end remains more exposed to global moves in Treasuries.

The direction of the spread from here will depend on whether US inflation continues to surprise on the upside and whether Australian data confirm the slowdown suggested by this week’s surveys. Local markets will watch the Melbourne Institute’s inflation expectations survey on Thursday, while in the US the Fed’s December meeting and accompanying projections are the next major event.