Australian benchmark yields could slip below US peers for the first time in over
a year as market bets diverge: investors increasingly expect the RBA is close to
ending hikes while the Fed retains further tightening scope. Some strategists
see Australian bonds outperforming US debt through end-2026. The Australia-US
10-year yield spread has tightened to about 12 bps, near the narrowest since
Sept 2025. Barrenjoey Markets and Westpac expect yields to converge in coming
months; NAB says the spread could turn negative. NAB Sydney rates strategist
Kenneth Crompton: "Our base case is the Australia-US 10-year yield spread turns
negative in 2027, but it would not be surprising to see this happen sooner. If
policy expectations between Australia and the Fed diverge as we expect by
year-end, the spread could easily test minus 20 bps."
