Australia Treasury bond yields slide, ASX 200 dribble ahead of RBA’s interest rate hike

• Markets in Australia remain cautiously optimistic as RBA’s fourth rate hike worth 0.50% eyed.
• Equities remain sidelined even as stimulus hopes help Asia-Pacific shares.
• Two-year, 10-year yields remain pressured around intraday low, reversing the week-start rebound.

Aussie traders remain cautious during early Tuesday, with eyes on the Reserve Bank of Australia’s (RBA) Interest Rate decision. While portraying the mood, the Australian Treasury Bond yields print losses while the equities remain depressed ahead of the fifth consecutive rate increase.

That said, Australia’s benchmark 10-year Treasury yields lose 1.70% to 3.636% while the two-year note yields 3.115%, down 2.35% intraday, by the press time. Also, Australia’s key equity index, S&P/ASX 200 fades the previous day’s rebound from a five-week low, retreating to 6,856 at the latest.

The reason for the market’s anxiety could be linked to the latest Aussie statistics. It’s worth noting that the latest statistics from Australia haven’t been so impressive to favor the fourth rate hike of the RBA. As per the broad readings, inflation jumped to the highest in three decades while the Unemployment Rate dropped to the lowest in 50 years. The problem, however, is with the housing market as Home Loans plunged by 8.5% in July, the second-largest fall in two decades. It should also be noted that the Participation Rate and net employment also cooled down recently, which in turn underpin the recession fears should the rate hike continues.

Also challenging the RBA hawks are the economic fears emanating from its largest consumer China, as well as from Europe, which in turn warrants caution on the part of the policymakers.

Even so, the AUD/USD prices remain firmer for the third consecutive day, up 0.13% intraday near 0.6800 as we write, amid cautious optimism in the market. In addition to the hawkish hopes from the RBA, the Aussie pair’s rebound could also be linked to the cautious optimism in the market.

Market sentiment improved during the early Asian session after the return of full markets brought expectations of more measures to tame the energy crisis. That said, the incoming UK PM Liz Truss is up for a £130 billion energy plan while the People’s Bank of China (PBOC) cuts the Reserve Requirement Ratio (RRR). Further, politicians from Germany/Eurozone are all in to battle with the recession woes with a heavy push to defend energy companies and stock for winters.

Moving on, the RBA’s rate hike will be crucial as a 0.50% lift is mostly priced-in and hence hawkish comments from the Rate Statement becomes necessary to defend Aussie bulls.