Australia’s 10-year government bond yield rose to around 4.75%, hovering near its highest level in more than two years, as markets priced in the risk of policy tightening by the Reserve Bank next year. The December meeting marked a clear shift toward a more hawkish stance, with Governor Michele Bullock noting that while the board did not explicitly debate raising rates, it did discuss the conditions under which policy tightening could become necessary in 2026. Minutes from the RBA’s most recent meeting highlighted growing concern that inflationary pressures were becoming more entrenched. Markets are currently pricing in roughly a 25%–33% chance of a rate hike in February and continue to assign a high probability to at least one additional increase by year-end. Major banks have also brought forward expectations for earlier tightening, citing excess demand, a tight labor market, and weak productivity growth. The benchmark 10-year yield is up nearly 40 basis points so far this year.