The Australian sharemarket is poised for a Monday rise, extending Friday’s rally despite lingering investor caution over potential contagion from a volatile global bond market. Futures indicate the S&P/ASX 200 will open 0.3 per cent higher. This positive sentiment follows a strong lead from Wall Street, which gained 0.7 per cent after slower-than-expected US jobs growth data prompted traders to pare back expectations for a Federal Reserve rate hike.
However, investors remain wary as US Treasuries have endured a months-long rout. Last week, yields on 10-year US government bonds, a global borrowing benchmark, briefly touched 5.34 per cent – their highest since 2002. Similarly, Australia’s 10-year bond yields hovered near 5.40 per cent, a peak not seen since 2011. These escalating yields are largely attributed to a surge in Brent crude prices, which traded close to $US103 a barrel, intensifying expectations that inflation will prove difficult to control. Wilson Asset Management portfolio manager Matthew Haupt commented on the precarious situation, stating, “It’s a really fine line at the moment – it could go either way.” He noted that bond market volatility typically spills into equity markets.
While the specter of soaring bond yields impacting equities has yet to fully materialise – Wall Street is up over 15 per cent in six months while the ASX 200 traded flat – official commentary reflects ongoing concern. Australian Treasurer Jim Chalmers noted rising borrowing costs would add “some billions of dollars” in budget pressure. Conversely, US Treasury Secretary Scott Bessent dismissed “consternation” over US Treasury yields, seeing them as consistent with global trends and indicative of underlying US economic strength. Betashares chief economist David Bassanese observed that equity markets are “trying hard to ignore downward pressure on valuations” but find support from resilient global economic activity, strong corporate earnings, and the AI investment boom. Traders will also monitor the Federal Reserve’s September policy meeting minutes for clues on future rate decisions, contrasting with the Reserve Bank of Australia’s recent fourth cash rate hike this year to 4.6 per cent.
