Australian Bond Exchange Weekly Update
17th 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 the interest rate steady at 4.00% p.a. The August inflation stood at 3.6% (YoY), down from 3.8% in July
- 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.
Australian Labour Market Softens: Unemployment Rises to 4.5%
Australia’s unemployment rate rose to 4.5% in September 2025, its highest level in four years, signaling a gradual cooling of the labour market.
Despite the economy adding approximately 14,900 new jobs during the month, this growth was insufficient to absorb the larger number of job seekers. The labour force participation rate also edged up to 67.0%, reflecting a growing number of Australians actively seeking employment.
Economists note that the rise in unemployment aligns with a broader slowdown in hiring and business investment activity. Combined with subdued inflation and slowing wage growth, this trend has led markets to increasingly price in the possibility of a Reserve Bank of Australia (RBA) rate cut in coming months to support economic conditions.
U.S.-China Trade Tensions Flare Again as Tariffs and Export Controls Escalate
U.S.-China trade tensions have significantly intensified following new retaliatory measures. China imposed sweeping export controls on rare earths and other critical materials, citing ongoing restrictions on chips and chip-making equipment from the U.S. and its allies.
In immediate response, the U.S. announced a plan to impose new 100% tariffs, set to take effect on November 1. This new duty would apply over and above any existing tariffs, marking a major escalation. While the tariff threat introduces significant volatility, trade and tariff risk remains one of the primary concerns for global credit risks, according to rating agencies like Fitch.
China Trade Beats Expectations, Shows Limited Impact from U.S. so far
China’s September trade data significantly surpassed expectations, demonstrating high resilience to existing U.S. protectionism. Exports accelerated to 8.4% year-on-year, while imports climbed 7.5%, beating forecasts.
The core of this resilience is diversification: while exports to the U.S. fell sharply by approximately 27%, this loss was more than compensated for by strong growth in emerging markets and key trading blocs (e.g., ASEAN up 15.6%, EU up 14.2%, Africa up 56.6%). The U.S. now accounts for only 10%–11.4% of China’s total exports. Furthermore, growth is structurally driven by high-value, high-tech M&E products (over 60% of exports), led by the “new trio” of electric vehicles, lithium-ion batteries, and solar batteries—all sectors with limited U.S. exposure. However, the proposed 100% U.S. tariff remains a material risk; analysts warn such an effective rate (≈ 140%) could “shut down trade” and negatively impact global growth, though moderation is widely anticipated due to the inflationary burden on the U.S
Swiss Court Rules Credit Suisse AT1 Bond Write-down Unlawful, But Investor Compensation Still Uncertain
In a major legal development, Switzerland’s Federal Administrative Court has ruled that the Swiss Financial Market Supervisory Authority (FINMA) acted unlawfully when it ordered the complete write-down of CHF 16.5 billion (approximately USD 18 billion) in Credit Suisse Additional Tier 1 (AT1) bonds during the bank’s emergency takeover by UBS in March 2023.
FINMA’s decision at the time effectively wiped out AT1 bondholders while allowing shareholders to receive UBS stock, reversing the traditional capital hierarchy and sparking widespread outrage. Thousands of investors filed legal challenges, arguing that the measure violated property rights and lacked a sufficient legal basis.
The recent court ruling upheld these concerns, finding that FINMA’s actions were not adequately justified under Swiss banking law. However, the court did not order the reinstatement of the bonds or immediate compensation, leaving the ultimate financial implications uncertain. FINMA has confirmed it will appeal the decision to Switzerland’s Federal Supreme Court, meaning the case could remain unresolved for several years.
While the judgment represents a legal milestone for affected investors, it offers no immediate recovery. Markets have nonetheless reacted with cautious optimism: claims linked to the written-down AT1 instruments have traded higher since the ruling, reflecting renewed hopes of partial compensation. Legal experts note that the case could reshape future frameworks for handling bank resolutions in Europe and influence how regulators approach contingent capital structures.
UBS, meanwhile, recently issued a new Additional Tier 1 Australian-dollar-denominated note on the over-the-counter market, which is trading in the secondary market at a yield to first call (29 September 2030) above 6%. The strong investor demand highlights the market’s confidence in UBS’s capital position despite lingering uncertainty surrounding the Credit Suisse legacy instruments.
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*Data accurate as at 17.10.2025
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