AU yields fall on weak jobs data, RBA hike risk remains | NEXTDC and CDC data centre bonds fall 2.80 and 1.30 points in five days

Key points

• The AU 10-year yield is 5.25%, down from 5.40% on 8 October.
• Weak jobs data drove the fall: employment dropped 39,300 against an expected rise of 20,000.
• The yield has edged up since. The 2Y yield (4.91%) is above the 4.60% cash rate.
• Big 4 fixed-rate bank bond prices rose 0.25 points in five days. Floating-rate prices were flat.
• NEXTDC Float Apr-30 fell 2.80 points and CDC Data Centres Float Jun-56 fell 1.30.
• Bank of Queensland is taking IOIs for a 3-year senior A$ bond, guided at 95bps over benchmark.

The AU 10Y yield is 5.25%. It peaked at 5.41% on 7 October, then fell to 5.22% on 15 October. That day, a weak jobs report showed employment fell by 39,300 in September against an expected rise of 20,000, and unemployment held at 4.7% after August was revised up from 4.6%. The yield has edged back up since, with markets still pricing a chance of another RBA hike.

The 2Y yield reflects market expectations for short-term interest rates, including the RBA cash rate (its main interest rate), over the next two years. At 4.91%, it is about 31 basis points (0.31 percentage points) above the 4.60% cash rate. The chart shows the 2Y yield rising ahead of the RBA's rate increases, with the cash rate raised four times in 2026, from 3.60% to 4.60%.

RBA hike odds

Markets are almost evenly split on whether the RBA raises the cash rate again at its next meeting. The RBA decision is due on 3 November, after the September CPI report on 28 October.

Source: LSEG Datastream. The cash rate target is 4.60%, after a 0.25 percentage point increase announced on 29 September 2026.

AU secondary market

When government yields fall, the prices of fixed-rate bonds rise. Big 4 bank bond prices moved in line with the fall in the 10Y yield. Price changes below are in points, where one point is 1% of a bond's face value.

Source: LSEG Datastream.

• Big 4 fixed bonds rose 0.19 points on the day and 0.25 over five days, in line with lower government yields.
• Big 4 floating bonds were broadly unchanged, down 0.02 points over five days. Their interest rate resets regularly, so they react less to changes in yields.
• Corporate bonds also rose, but by less than Big 4 fixed bonds.

Two bonds stood out, and both fell.

• NEXTDC Float Apr-30 fell 0.80 points on the day and 2.80 over five days, from 101.70 to 98.90. This was the largest move in the market. It is a short-dated floating-rate bond, so it has little sensitivity to changes in interest rates.
• CDC Data Centres Float Jun-56 fell 0.70 points on the day and 1.30 over five days. Its fixed-rate bond (7.332%) fell 1.10 points over five days, while government yields fell.

Related news over the period:

• NEXTDC told the ASX on 21 October that it cut its FY27 guidance after Jemena delayed power works for its M3 Melbourne data centre. Net revenue guidance is now A$475 million to A$500 million, down from A$615 million to A$640 million.
• The Financial Times reported on 16 October that investors have been selling data centre bonds globally, with bonds funding some data centre projects falling below their face value.

AU primary market

Bank of Queensland is taking indications of interest (IOIs) for a 3-year senior A$ benchmark bond. An IOI is a non-binding note from an investor saying how much it may buy before the deal is priced. The notes are senior unsecured, meaning ordinary bank debt not backed by specific assets, and can be issued as floating-rate notes, fixed-rate notes, or both.

Initial price guidance (IPG) is the starting level shown to investors.

Terms are indicative and subject to change. "Area" means the level is approximate. 3m BBSW is the 3-month bank bill swap rate, the Australian benchmark for floating-rate notes. SQ ASW is a spread over the swap rate used to price fixed-rate bonds.

• Queensland law. Not listed. Expected to be exempt from interest withholding tax.
• Expected to be eligible for repurchase agreements with the RBA (borrowing from the RBA against the bond).
• Cleared through Austraclear, Euroclear and Clearstream (via Bridge).

Fixed-rate bank bond prices rose as government yields fell, while floating-rate bank bond prices were broadly unchanged. Upcoming events are the September CPI report on 28 October and the RBA decision on 3 November.

Disclaimer: This material is provided for general information purposes only and does not constitute financial product advice, a recommendation, or an offer to buy or sell any security. It has been prepared without taking into account the objectives, financial situation, or needs of any individual recipient, and should not be relied upon as the sole basis for any investment decision. All figures, spreads, and yields referenced are indicative, sourced from third-party data providers (including Reuters) as at the date noted on each chart, and are subject to change without notice. Past movements in rates, spreads, or bond prices are not a reliable indicator of future performance. Recipients should seek their own independent financial, legal, and tax advice before acting on any information contained in this material.

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