Australian Bond Exchange Weekly Update
17th April 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) has kept the cash rate steady at 4.10% per annum. Inflation for February stands at 2.4%, with the trimmed mean at 2.7%.
- United States: The Federal Reserve maintained its cash rate within the range of 4.25% – 4.50% per annum. March’s inflation data declined to 2.4%. Core inflation (excluding food and energy) rose by 2.8%.
- United Kingdom: The Bank of England (BoE) has held its Bank Rate at 4.50%. February’s inflation eased to 2.8%, down from 3.0% in January.
- Eurozone: The European Central Bank (ECB) kept its deposit facility rate unchanged at 2.50% per annum. Inflation in February moderated to 2.3%, compared to 2.5% in the previous month.
Market Insights
- RBA flagging possible rate cut in May.
- Global Bond Markets are rebounding.
- Westpac Leading Index slowing.
- Happy Easter from the ABE Team!
RBA Flagging Possible Rate Cut in May
The Reserve Bank of Australia (RBA) has indicated openness to a potential interest rate cut at its upcoming meeting on May 20, 2025. While the Bank has not made any formal commitment, recent signals suggest a rate cut is becoming more likely.
At its April meeting, the RBA kept the cash rate steady at 4.10% but noted that global uncertainties — particularly the intensifying U.S.–China trade tensions — could influence future decisions. Governor Michele Bullock stated it is “too early to determine the future path of interest rates,” pointing to the need for further data on inflation and economic activity.
Global Bond Markets Are Rebounding
Global bond markets have shown signs of recovery after a period of volatility. U.S. Treasury Secretary Scott Bessent addressed market stability in a Bloomberg Television interview, stating he has tools to support the market if necessary. He also dismissed concerns over foreign governments offloading their U.S. Treasury holdings.
On the investment side, J.P. Morgan Asset Management’s Bill Eigen has started deploying capital into corporate debt after holding cash for several years. His $10 billion JPMorgan Strategic Income Opportunities Fund has recently added high-yield and convertible bonds, as well as ETFs and closed-end funds focused on corporate debt. Eigen noted he’s seeing opportunities not available in years, particularly with high-yield debt offering attractive returns, and spreads widening above U.S. Government Treasuries.
With the situation still deteriorating, there is a clear risk of more significant sentiment declines in the months ahead. All component indexes deteriorated in April. The Westpac Melbourne Institute Consumer Sentiment Index is a composite measure based on five sub-indexes: two tracking assessments of family finances, two tracking expectations for the economy and one on whether now is ‘a good time to buy a major household item’.
Westpac Leading Index Slowing in March
The Westpac–Melbourne Institute Leading Index, which signals the likely pace of economic growth three to nine months ahead, slowed to 0.6% in March, down from 0.9% in February.
This softening marks a key shift and may be early evidence of the impact of the escalating trade tensions. While the broader outlook remains uncertain, the current trajectory suggests further moderation in growth could be ahead.
The ABE team wishes you all a Happy Easter!
*Data accurate as at 17.04.2025
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