Australia raises its cash rate to 4.60%, with the US 10-year yield at 5.24%
Australia lifted its cash rate to 4.60% on Tuesday, September 29, with the 10-year yield at 5.24% and WTI crude at $91.99 before a nearly unchanged US open.
Key takeaways
The Reserve Bank of Australia raised its cash rate, the main policy rate, to 4.60% on Tuesday, and US stocks are set to open little changed after falling on Monday.
Just after 7 a.m. Eastern time, SPY, the fund that holds the S&P 500, was 0.1% above Monday's close in trading before the open. Monday's close was 0.7% lower. QQQ, the Nasdaq-100 fund, was 0.3% higher before the open after a 1.1% fall on Monday. A flat open after a down day is a pause.
The increase is a quarter of a percentage point, from 4.35%, and it takes effect on Wednesday. It is the fourth rise this year and takes the rate to the highest level since 2011. The decision was unanimous. 33 of 34 economists polled ahead of the meeting expected it.
What matters is the reason, not the increase itself.
"The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts," the bank said.
The bank has tied the increase to energy prices running above its August forecasts. US yields have risen alongside that. The 10-year yield ended Monday at 5.24%, 28 basis points above its close on Tuesday, September 22.
TLT, which holds long-term US Treasury bonds, fell 0.9% on Monday and is down 3.9% over the five sessions. It touched $78.27, its lowest price in a year, and was 0.2% higher before the open.
TLT closed lower in five straight sessions
On Wednesday, September 16, the Federal Reserve lifted its target range by a quarter of a percentage point, to 3.75% to 4%. The effective federal funds rate, the overnight rate banks charge one another, moved from 3.63% to 3.88% the next day. The 10-year sits more than a percentage point above that rate.
That is also why gold fell. It pays no interest, and cash now yields more than it did before the Fed's move. GLD, a fund that holds gold bullion, fell 3.9% on Monday and was 0.8% higher before the open. Gold futures were up 0.4% at $4,183.9 an ounce.
A dip in crude this morning does not take back the energy point. West Texas Intermediate was at $91.99 a barrel, 0.7% below Monday's settlement, after reaching $94.72. USO, the fund that holds US crude-oil futures, was down 1.3% before the open.
There is still no deal to reopen the Strait of Hormuz, a major route for oil shipments. Iran's foreign minister, Abbas Araghchi, said he met Qatari mediators in New York and that they would take new ideas to the US side.
At 10 a.m. Eastern the government releases August job openings. The forecast is 7.225 million, against 7.271 million in July. September consumer confidence comes out at the same hour. The Conference Board's index was 89.4 in August.
Governor Michael Barr speaks on the economic outlook at 12:40 p.m. Eastern in Detroit. Vice Chair for Supervision Michelle Bowman has pre-recorded remarks at 11 a.m. Eastern, and Governor Christopher Waller speaks on payments at 3 p.m. Eastern.
A job-openings figure near the forecast would leave the labor market looking much as it did when the Fed raised rates. A clear miss, in either direction, is what would change the case for another increase.
Frequently asked
How much did Australia raise its cash rate?
The Reserve Bank of Australia raised the rate by a quarter of a percentage point, from 4.35% to 4.60%, its fourth increase this year and the highest level since 2011.
Why did the Reserve Bank of Australia raise rates?
The bank said the Middle East conflict had broadened and global energy prices were much higher than its August forecasts had assumed.
Where is the US 10-year Treasury yield?
The 10-year yield closed Monday at 5.24%, 28 basis points higher than its close on September 22.
What US data comes out on Tuesday?
August job openings are due at 10 a.m. Eastern with a forecast of 7.225 million, and September consumer confidence comes out at the same time.
