Australian Bond Exchange Weekly Update
1st August 2025
Key Points
- Australia: The RBA kept the cash rate steady at 3.85% p.a. Governor Bullock signaled a possible 25bp cut in August, pending confirmation of declining inflation.
- United States: The Fed held rates unchanged at 4.25–4.50% p.a. Some members pushed for rate cuts, but the Fed remains cautious due to ongoing inflation concerns.
- United Kingdom: The BoE maintained its Bank Rate at 4.25% p.a. Markets widely expect a 25bp cut at next week’s meeting amid weaker economic data.
- Eurozone: The ECB kept its deposit rate steady at 2.0% p.a. June inflation held at 2.0%, aligned with the ECB’s target.
- New Zealand: Q2 CPI inflation came in below expectations, increasing likelihood of an RBNZ rate cut in August.
Market Insights
- The RBA is widely expected to cut rates by 25bp in August, following a softer Q2 CPI result, with markets fully pricing in easing.
- The Fed held steady and adopted a more measured tone, with stronger GDP and sentiment data reducing the likelihood of a September cut.
- The ECB maintained its policy stance at 2.0% p.a., with President Lagarde signalling a holding pattern.
- The newly finalised US-EU tariff deal is viewed as a positive development for trade relations, adding momentum to broader negotiations with key partners.
Central Bank Moves
The US Federal Reserve held interest rates steady this week, keeping the federal funds target range at 4.25%–4.50% p.a. In his press conference, Chair Jerome Powell was interpreted as taking a less dovish stance, reinforcing the Fed’s intention to assess upcoming data before making any moves. Meanwhile, Q2 GDP exceeded expectations at 3.0% versus 2.6%, with labour market strength, higher consumer confidence, and equity markets trading near record highs. Despite two dissenters advocating for cuts, the probability of a September rate cut has declined from 70% to 49%.
In Australia, Q2 CPI data came in slightly softer than expected. The trimmed mean was 0.6% for the quarter, down from 0.7% previously. This has led markets to fully price in a 25bp rate cut by the RBA at its August meeting.
In Europe, the ECB held interest rates steady, with President Christine Lagarde noting, “you could argue we are now on hold.” Similarly, the Bank of Canada left rates unchanged, although with a slightly more dovish tone.
Tariff Tensions & Price Swings
Geopolitical tensions and tariff policy developments contributed to significant market movements this week. Crude oil prices climbed approximately 7% after former US President Donald Trump threatened secondary sanctions on Russia in response to alleged violations of prior trade agreements. This geopolitical risk premium has added upward pressure to energy markets.
In trade news, the US and European Union finalised a new 15% tariff agreement over the weekend. The deal, similar in structure to one recently reached with Japan, includes commitments to increased EU purchases of US goods and joint investment pledges in key industries.
On the commodities front, copper prices experienced a record-setting intraday decline of nearly 20%. The drop followed an announcement that the US would exclude certain widely imported copper products from new 50% tariffs, leading to market overreaction and a surge in short-term volatility.
Global Policy: No Rush to Ease
The ECB maintained its deposit rate at 2.0% p.a., with President Lagarde noting that “you could argue we are now on hold.” The Bank of Canada also left its policy rate unchanged but adopted a more dovish tone, citing softening growth conditions.
The Bank of England kept its Bank Rate steady at 4.25% p.a. amid weaker-than-expected data, and markets now see a 25bp cut at its next meeting as increasingly likely.
In New Zealand, Q2 CPI data surprised to the downside, lifting expectations for a near-term rate cut by the RBNZ, which may move ahead of its peers if disinflation persists.
These developments suggest that while global central banks remain open to easing, most are taking a data-dependent approach and waiting for clearer signs of slowing inflation and economic weakness.
Register your interest in a fixed income investment opportunity
Introducing a fixed income security from Pacific National, now available through ABE.
Investment Overview:
- Product: Pacific National Corporate Bond
- Type: Fixed Income Investment
- Yield to Maturity: 5.50 % p.a.
- Coupon: 3.7% p.a Paid Semi-Annually
- Maturity Date: 24 September 2029
- Currency: AUD
- Minimum Investment for Retail: $10,000 AUD
- Eligibility: Retail & Wholesale Investors
About Pacific National
Pacific National is one of Australia’s leading freight and logistics providers. With a vast infrastructure network, a diverse fleet, and long-term customer partnerships, it plays a critical role in keeping supply chains moving across the country. Every day, Pacific National transports millions of tonnes of essential freight including coal, grain, steel, construction materials, and refrigerated goods supporting Australia’s economy, businesses, and communities nationwide.
- National Logistics: Leading player in intermodal and steel freight across Australia
- Infrastructure: Deep national footprint with long-term customer contracts
- Coverage: Operating across every major freight corridor
- End-to-End Delivery: From rural depots to international ports—safe, efficient, and reliable
- Coal Freight: Largest network in New South Wales
- Queensland Operations: Second-largest freight operator in the state
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 01.08.2025
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