Australian Bond Exchange Weekly Update
18th August 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) lowered the cash rate by 0.25%pa to 3.60%pa. Headline inflation was steady at 2.1%pa as of June.
- United States: The Federal Reserve held its target cash rate steady at 4.25%pa–4.50%pa. July’s headline inflation came in at 2.7%pa YoY, unchanged from June.
- United Kingdom: The Bank of England (BoE) cut its Bank Rate by 0.25%pa to 4.00%pa. June inflation accelerated to 3.6%pa YoY, up from 3.4% in May.
- Eurozone: The European Central Bank (ECB) kept its deposit rate at 2.0%pa. Inflation in June edged up to 2.0%pa, aligning with the ECB’s target.
Market Insights
- RBA decreases cash rate by 0.25%pa to 3.60%pa.
- US PPI surprises on the upside.
- US tariffs back in focus.
RBA Decreases Cash Rate by 0.25%pa to 3.60%pa
The Reserve Bank of Australia (RBA) unanimously decided to cut the official cash rate by 25 basis points, reducing it from 3.85%pa to 3.60%pa. This marks the third rate cut of 2025 as the central bank seeks to support growth amid weaker productivity gains and softening business conditions.
The surprise was not the cut itself, which markets largely expected, but the RBA’s warning on productivity and wages. Policymakers flagged that slower productivity growth will weigh on the economy and keep real wage growth subdued, even as inflation trends back within target.
Financial markets reacted quickly. The Australian dollar weakened and bond yields slipped as traders priced in the possibility of further easing later in the year if growth momentum continues to falter.
US PPI Surprises on the Upside
The U.S. Producer Price Index (PPI) rose sharply, with both headline and core inflation climbing 0.9% m/m (vs. 0.2% expected). On a yearly basis, core PPI accelerated to 3.7% YoY, up from 2.6%, the fastest pace in over a year.
The data suggests that tariffs are driving up input costs for businesses, although these have not yet filtered through to consumers, as shown by a muted CPI print earlier this week.
Pantheon Macroeconomics projects the core PCE deflator to rise 0.26% m/m, lifting the annual rate to 2.9% and moving further away from the Fed’s 2% target.
Goldman Sachs has warned that tariff effects are only just beginning to feed through, likely shifting more of the burden onto U.S. consumers in the months ahead.
Markets took note. Treasury yields moved higher and equities turned volatile as investors weighed the risk of tighter financial conditions persisting if cost pressures remain elevated.
Register your interest in a fixed income opportunity designed exclusively for Wholesale Investors
Introducing a fixed rate note from Magnetic rail, now available through ABE.
Investment Overview:
- Product: Magnetic Rail Group Pty Ltd
- Type: Fixed Rate Note
- Coupon: 9.25 % p.a. Paid Semi-Annually
- Maturity Date: 24 May 2030
- Currency: AUD
- Minimum Investment for Wholesale: $50,000 AUD
- Eligibility: Wholesale Investors Only
About One Rail
One Rail is one of Australia’s leading rail freight operators, with a strong presence across key resource and agricultural corridors. The company provides essential bulk haulage services that connect producers with ports, markets, and communities nationwide.
Through its subsidiary, Magnetic Rail Group, One Rail continues to expand its footprint in coal haulage while maintaining a reputation for safety, reliability, and efficiency. Its integrated infrastructure and long-term customer partnerships support predictable revenues and strong operational performance.
With decades of industry experience, One Rail plays a pivotal role in Australia’s supply chain and remains committed to sustainable, efficient, and future-ready freight solutions
Risks to Consider
📘 Example: How Fixed Income Works
A company issues a debt security with the following terms:
- Term: 5 years
- Coupon: 5.15% p.a., paid semi-annually
- Issue Price: $100
- Minimum Investment: $10,000 AUD
Investor Scenario – Semi-Annual Payments:
Sarah may choose to receive income every 6 months. She receives $2,575 every 6 months (5.15% × $100,000 / 2). Over 5 years, she receives $25,750 in total income, plus her $100,000 principal at maturity (subject to no credit event or early redemption).
If she sells before maturity, she may receive more or less than $100,000 depending on market conditions.
*Data accurate as at 18.08.2025
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