Australian Bond Exchange Weekly Update
24th October 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.60% p.a. at its September meeting. Monthly CPI gained 3.0% for August and the Trimmed Mean estimate was 2.6% (YoY). The Trimmed Mean excluded the annual rise in electricity, alongside other large price rises and falls.
- United States: The Federal Reserve cut its target cash rate by 0.25% to 4.00%–4.25% p.a. August headline inflation was 2.9% (YoY), up from 2.7% in July. Monthly Producer Price Inflation surprised and dropped by 0.1% (MoM) in August.
- United Kingdom: The Bank of England (BoE) held interest rate steady at 4.00% p.a. The August inflation stood at 3.8%(YOY).
- Eurozone: The European Central Bank (ECB) has maintained its deposit rate at 2.0% p.a. Inflation in September increased slightly to 2.2%(YoY) – up from 2.0% in August.
Here are the latest monetary‑policy and inflation figures for key economies:Region Policy Rate Latest Inflation (YoY) Australia Cash rate 3.60% (Reserve Bank of Australia, Sept 2025) 3.0% to August 2025 (monthly CPI indicator) United States Policy range 4.00–4.25% (Federal Reserve cut 25 bps on 17 Sept 2025) 2.9% to August 2025 (CPI) United Kingdom Bank rate 4.00% (Bank of England) 3.8% to August 2025 Eurozone Deposit facility rate 2.00% (European Central Bank held rates 11 Sept) Headline inflation ~2.1% (ECB projected average for 2025)
Market Insights
- Current Investment Opportunities
- Australia on Track for Third-Highest Grain Harvest on Record
- U.S. corporate earnings have surprised to the upside
- China’s domestic economy continues to struggle
- The Bank of England to Launch System-Wide Stress Tests on Private Credit Markets
- France was downgraded to A+ from AA- by S&P
Australia on Track for Third-Highest Grain Harvest on Record
Australia is poised for a strong broadacre winter crop in 2025-26, with ABARES forecasting output of around 62 million tonnes the third-largest harvest on record. The strong outlook reflects a combination of improved soil moisture, favourable planting conditions, and positive seasonal forecasts across key grain-producing regions. Timely spring rainfall and mild finishing conditions will be crucial to sustaining high yields, while any extended dry spells or heat events could reduce grain quality and output.
Why is this important:
A good winter crop is essential to Australia’s agricultural and trade performance. In strong production years, grain exports can exceed $10 billion, strengthening the national trade balance and contributing materially to GDP. This also supports rural employment and regional economic stability, particularly in key exporting states such as Western Australia and New South Wales.
Stronger agricultural and commodity production typically drives higher freight and haulage demand, benefiting Australia’s transport infrastructure network. This includes rail logistics providers such as Magnetic Rail, which play a key role in moving bulk goods from regional areas to ports. Details about the wholesale Magnetic Rail bond are available here.
Product: Magnetic Rail Group Pty Ltd
Type: Fixed Rate Note
Coupon: 9.25 % p.a. Paid Semi-Annually
Yield to Maturity: 7.5% to 8.2% range
Maturity Date: 24 May 2030
Currency: AUD
Minimum Investment for Wholesale: $50,000 AUD and increments of $10,000 AUD
Eligibility: Wholesale Investors Only
U.S. corporate earnings have surprised to the upside
U.S. corporate earnings have generally surprised to the upside this quarter, as a large number of companies exceeded market expectations. Notable performers such as General Motors, JPMorgan Chase, and Goldman Sachs reported results that comfortably beat analyst forecasts, reflecting resilient consumer demand and disciplined cost management despite elevated financing costs.
According to FactSet, around 85 per cent of S&P 500 companies that have reported so far have surpassed profit forecasts, driving blended earnings growth of about 8.5 per cent year-on-year potentially the strongest quarterly performance since 2021. This has helped maintain a broadly positive tone across equity and credit markets, with investors encouraged by evidence that U.S. corporates continue to adapt effectively to a higher-rate environment.
Why is this important:
When U.S. companies broadly outperform earnings expectations, it signals underlying financial strength and resilience. For fixed-income investors, stronger earnings can reduce default risk, as companies are more likely to meet debt obligations, maintain balance-sheet discipline, and avoid credit downgrades — all of which support bond valuations and overall market stability.
China’s Domestic Economy Continues to Struggle
China’s economy expanded 4.8 per cent in the third quarter, marking its slowest pace of growth in a year and underscoring the persistent challenges facing domestic demand. Despite targeted policy easing, deflation remains a pressing issue, discouraging both spending and investment as households and businesses delay purchases in anticipation of lower prices.
The property sector continues to weigh heavily on growth, with investment down 13.9 per cent in the first nine months of the year. Home prices fell across both new and secondary markets for a fourth consecutive month, deepening the drag on consumer sentiment. Meanwhile, retail sales grew only 3 per cent year-on-year, highlighting weak household consumption despite ongoing government efforts to stimulate demand.
These trends suggest that China’s economic recovery remains fragile. Sustained policy support, combined with structural reforms to boost confidence and consumption, will likely be required to restore more balanced and durable growth momentum.
The People’s Bank of China Left Its Benchmark Loan Prime Rate Unchanged
The People’s Bank of China (PBoC) left its benchmark Loan Prime Rates (LPRs) unchanged on Monday, maintaining an loose monetary policy stance amid continued disinflationary pressures. The one-year LPR remains at 3.0 per cent, while the five-year LPR, which guides mortgage rates, stays at 3.5 per cent.
This decision aligns with market expectations and signals a cautious approach from policymakers as they navigate a complex mix of subdued domestic growth, soft consumer prices, and heightened U.S.–China trade tensions. By holding rates steady, the central bank aims to preserve financial stability and support credit flow while avoiding additional downward pressure on the renminbi.
The steady policy setting reflects Beijing’s broader objective of ensuring stability through gradual and targeted measures rather than large-scale stimulus, as it manages the ongoing rebalancing of the economy.
Bank of England to Launch System-Wide Stress Tests on Private Credit Markets
The Bank of England has announced plans to conduct system-wide stress tests on the rapidly growing private credit market, citing concerns over rising complexity, lack of transparency, and potential parallels to the subprime crisis that preceded the global financial crisis.
More than 50 institutions including asset managers, banks, insurers, pension funds, and hedge funds have already submitted initial feedback. The results of the stress tests are expected within the next 9 to 12 months. The global non-bank private debt market is currently estimated at between US$1.5 and US$2 trillion.
France Was Downgraded to A+ from AA- by S&P
France’s sovereign credit rating has been downgraded by S&P Global Ratings from AA to A+, with the outlook revised to stable from negative. The agency cited concerns over the country’s fiscal trajectory, including persistent deficits and rising debt levels, which have not been adequately addressed through structural reforms or spending controls. This marks a further erosion in investor confidence in France’s public finances, despite earlier attempts by the government to commit to gradual consolidation.
Current Investment Opportunities
Contact your ABE adviser now to take advantage of this opportunity today
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*Data accurate as at 24.10.2025
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