Australian Bond Exchange Weekly Update
26th September 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) lowered the cash rate by 0.25% to 3.60% p.a. Monthly CPI rose 3.0% (YoY) in August, while the Trimmed Mean estimate was 2.6% (YoY). The Trimmed Mean excluded the annual rise in electricity, along with other large price increases and decreases.
- 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 to the downside, dropping 0.1% (MoM) in August.
- United Kingdom: The Bank of England (BoE) kept interest rates steady at 4.00% p.a. August inflation stood at 3.6% (YoY), down from 3.8% in July.
- Eurozone: The European Central Bank (ECB) maintained its deposit rate at 2.0% p.a. Inflation in August increased slightly to 2.1% (YoY), up from 2.0% in July.
Market Insights
- Current Investment Opportunities
- Australian monthly CPI for August stronger than expected
- US Fed Chairman Powell remains cautious1
- Costco’s solid quarter suggests demand for essentials remains resilient, even as the broader economy cools
Australian Monthly CPI Stronger Than Expected
The Monthly CPI Indicator rose 3.0% in the year to August, above the market’s median estimate of 2.9% (YoY) (forecast range: 2.4% to 3.3% YoY).
This stronger-than-expected result surprised markets. Benchmark government bonds sold off, with the 5-year yield rising from 3.68% to 3.77% p.a. Deutsche Bank chief economist Phil O’Donaghoe revised his outlook, stating he no longer expects the RBA to cut rates at its November meeting. (We attended the DB Australian Global Credit Forum on Wednesday, where he shifted his view from his morning presentation after the release of the CPI figures.)
US Fed Chairman Powell Remains Cautious
Powell emphasised a cautious and deliberate approach to future rate cuts. He warned that moving too aggressively could compromise progress on inflation, while being overly cautious could weaken the labor market. He also noted that there was no broad support within the FOMC for a larger half-point cut. Instead, the committee agreed on a more modest 25-basis-point reduction.
Powell highlighted a darkening economic outlook, citing signs of a weakening labor market, slower growth, and persistent inflation. He described near-term risks as “two-sided” — with upside risks to inflation and downside risks to employment.
On labor, Powell acknowledged that artificial intelligence may be contributing to displacement in some entry-level roles and slowing hiring among younger workers, but stressed that AI is unlikely to be the primary driver.
Finally, Powell described the September 2025 rate cut as a “risk-management cut”, underscoring the Fed’s increasing focus on downside risks to employment in its policy decisions.
US: Costco beats in Q4 on steady shopper traffic
Costco Wholesale Corp posted quarterly earnings and revenue that beat Wall Street estimates on Thursday, as steady customer traffic and strong sales helped the retailer offset higher costs. The membership-only chain reported Q4 profit of $5.87 per share (vs $5.81 expected) and revenue of $86.16bn (vs $86.08bn expected). Net income rose to $2.61bn from $2.35bn a year earlier, with net sales up 8% to $84.4bn across 914 warehouses worldwide. Why it matters: as one of America’s biggest retailers—with substantial sourcing from China, Costco’s results suggest the all-important US consumer is still alive and spending despite the negative headlines.
Current Investment Opportunities
Contact your ABE adviser now to take advantage of this opportunity today
|
| Investment | Coupon | Yield To Maturity | Maturity |
|---|---|---|---|
| Commodities Receivables and Finance Trust (CRAFT) Secured Notes (Wholesale Only) | 8.00% | 8.00% | 31 March 2030 |
| Under Armour Inc Bond Linked Security | 6.00% | 6.00% | 18 June 2026 |
| Ford Motor Credit Linked Security | 6.25% | 6.05% | 20 December 2026 |
| Magnetic Rail Group Pty Ltd (Wholesale Only) | 9.25% | 7.50%–8.00% | 27 May 2030 |
| MA Financial Market Linked Security | 8.00% | 6.89% | 31 July 2026 |
| Sydney Airport Inflation Linked Bond | CPI+3.12% | 5.90% | 20 November 2030 |
| Jaguar Land Rover Bond Linked Security | 4.50% | 6.77% | 19 November 2026 |
| Goodyear Tire and Rubber Company Credit Linked Security | 4.50% | 6.66% | 22 March 2027 |
| Rolls Royce Bond Linked Security | 5.50% | 5.50% | 19 February 2026 |
| Jaguar Land Rover Bond Linked Security | 8.00% | 6.31% | 20 December 2026 |
| Xerox Bond Linked Security | 4.50% | 6.81% | 15 August 2028 |
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*Data accurate as at 26.09.2025
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