Australia's yield curve flips as growth slows

The front end of Australia's government bond yield curve has inverted for the first time in 21 months. Investors doubt whether the Australian central bank will be able to further raise the key rate, being in the face of growing recession risks.

This week, for the first time since March 2021, the yield of benchmark three-year bonds was below the interest rate. Australia's central bank has recently raised its key rate by 25 basis points to 3.10%. On Wednesday, the yield on three-year bonds was 3.07%.

The Reserve Bank of Australia's actions to curb inflation are complicated by the rapid pace of inflation and weakening economic growth. According to official information released Wednesday, GDP growth for the third quarter amounted to 0.6%. This is slightly below the forecasts of economists polled by Bloomberg, who had expected to see an increase of 0.7%. The Reserve Bank of Australia has raised its key rate by 300 basis points this year. Half of those hikes came in the third quarter.