Australian dollar suffers setback, yields spike to 15-year peak

Bond markets reacted sharply, with three-year yields jumping 18 basis points to 5.050%, while 10-year yields climbed to 5.256%, their highest levels since mid-2011.

Investors also ramped up wagers that the U.S. Federal Reserve will raise rates at its meeting next week, providing broad support for the U.S. dollar.

The Aussie was flat at $0.7161, after sliding 0.8% overnight and pulling back from a four-month high of $0.7238. Initial support is seen at $0.7122, while major resistance lies at $0.7277.

The kiwi dollar was hanging on at $0.5811, after losing 0.7% overnight to hit a six-week low of $0.5795. Major support comes in at $0.5762, with resistance around $0.5900.

New Zealand debt also took a beating as 10-year yields jumped 13 basis points to 5.055%, its highest since late 2023.

The key 2-year swap rate surged 21 basis points to 4.024%, as investors bet the Reserve Bank of New Zealand would be forced to tighten more aggressively.