Australian Bond Exchange Weekly Update
8 May 2026
Market Insights
- We are working on an exciting new Credit Linked Note – details coming shortly
- RBA hikes cash rates again to 4.35%
- Victorian government keeps on spending
- China’s April private PMI is showing signs of stabilisation
________________
Key Points:
- Australia: The RBA increased cash rates by 0.25% to 4.35% p.a. at its April meeting. March CPI increased to 4.10% p.a., and the Trimmed Mean increased to 3.50% p.a.
- United States: The Federal Reserve left the federal funds rate unchanged at 3.50%–3.75% p.a. at its April 2026 meeting. The latest U.S. CPI inflation rate is at 3.3% p.a. as of March 2026. Core CPI was more contained at 2.6% p.a.
- United Kingdom: The Bank of England held Bank Rate steady at 3.75% p.a., and CPI for March increased to 3.3% p.a., up from 3.0% in February.
- Eurozone:The European Central Bank kept its key deposit facility rate unchanged at 2.00% p.a., and recent data show inflation in the euro area increased to 2.6% p.a. in March, up from 1.9% in February.
| Region | Policy Rate | Latest Inflation (YoY) |
|---|---|---|
| Australia | RBA Cash Rate 4.35% p.a. | 4.1% p.a. to March 2026 |
| United States | Fed Funds 3.50–3.75% p.a. | 3.3% p.a. to March 2026 |
| United Kingdom | Bank Rate: 3.75% p.a. | 3.3% p.a. to March 2026 |
| Eurozone | Deposit Facility Rate: 2.00% p.a. | 2.6% p.a. to March 2026 |
RBA hikes cash rates again to 4.35%
The RBA has lifted the cash rate by 25 basis points to 4.35% following its May 2026 meeting, a move that was widely expected by markets. The decision reflected a stronger consensus within the board compared with March, passing 8-1 after the previous 5-4 split. In outlining the reasons behind the increase, the RBA pointed to renewed inflation pressures linked to the Middle East conflict, including broader second-round effects across the economy. These concerns have added to existing domestic inflation pressures tied to ongoing capacity constraints.
Governor Michele Bullock also used the post-meeting press conference to warn governments against introducing further cost-of-living support measures in upcoming budgets, arguing that additional spending risks keeping inflation elevated for longer. She noted that even modest increases in government spending could complicate efforts to bring inflation back within the target range, adding that income support measures can make it harder to slow overall demand in the economy.
Implied Overnight Rate Curve
Victorian government keeps on spending
The Victorian government handed down its state budget on the same day, announcing $18 billion in additional spending since the mid-year budget update in December. Victoria’s net debt is now forecast to approach $200 billion by June 2030, while annual interest repayments are expected to rise to $11.8 billion, representing almost 10% of state revenue.
China’s April private PMI is showing signs of stabilisation
China’s April private sector PMI data pointed to modest economic expansion, with the services index rising to 52.6 and suggesting some stabilisation in activity. Despite the improvement, the recovery remains uneven, weighed down by weak export demand, subdued consumer spending, and ongoing job cuts.
The figures come ahead of the May 14-15 summit in Beijing between Presidents Donald Trump and Xi Jinping. Discussions are expected to centre on easing trade tensions and managing broader geopolitical risks, including the ongoing conflict involving Iran.
World Economic Calendar
________________
Looking for Income Opportunities in a Higher Rate Environment?
A new AUD-denominated fixed income offering with indicative returns of 7.50%–8.00% p.a. is expected to launch shortly for eligible investors, subject to final terms and documentation.
Indicative Investment Terms
- Term: 5 years
- Indicative Coupon: 7.50%–8.00% p.a., paid semi-annually
- Issue Price: $100
- Minimum Investment: $10,000 AUD
Example: How Fixed Income Works
A company issues a debt security with the following terms:
- Term: 5 years
- Coupon: 6.15% 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 $3,075 every 6 months (6.15% × $100,000 / 2).
Over 5 years, she also receives $30,750 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 08.05.2026
Disclaimer: This webpage has been prepared by Australian Bond Exchange Pty Ltd ACN 605 038 935 AFSL 484453 (ABE). The information contained in it is of a general nature only. It was prepared without considering your financial needs, circumstances and objectives. Before investing in this security, you should consider whether it is appropriate for your circumstances and review the Master PDS and PDS. This website may contain links to other third-party websites, some of which require a subscription to read. Such links are for your convenience only, and ABE does not recommend or endorse these third-party sites. No representation or warranty is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions, or other information contained in this website. This website may contain certain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors, many of which are beyond our control. Past performance is not an indication of future performance. To the maximum extent permitted by law ABE disclaims all liability and responsibility for any direct or indirect loss or damage that you may suffer as a result of relying on anything on this webpage.