Australia sovereign yield curve
ACGB (AUD) — full term structure, 2s10s and 3m10y spreads, NY Fed recession probability, Nelson-Siegel-Svensson fit.
Data as of June 30, 2026Term structure
| Tenor | 3M | 6M | 1Y | 2Y | 3Y | 5Y | 7Y | 10Y | 20Y | 30Y |
|---|---|---|---|---|---|---|---|---|---|---|
| Yield (%) | 3.90 | 3.85 | 3.78 | 3.72 | 3.78 | 3.95 | 4.10 | 4.28 | 4.55 | 4.62 |
Term structure with NSS fit
Observed yields (markers) overlaid with the Nelson-Siegel-Svensson smoothed fit (orange).
Dashed line = current policy rate (3.85%).Recession probability — 12 months ahead
Estrella-Mishkin probit (NY Fed): P(recession) = Φ(-0.5333 - 0.6629 × spread3m10y).
Nelson-Siegel-Svensson parameters
Fit residual RMSE: 0.014 pp. See the NSS methodology page for the parametric form.
| β₀ | β₁ | β₂ | β₃ | λ₁ | λ₂ |
|---|---|---|---|---|---|
| 4.876 | -0.862 | -2.027 | -0.585 | 1.50 | 5.00 |
How to read this country's curve
Look first at the 10-year yield in the headline tiles above — that is the benchmark long-term borrowing cost for this country. Then compare it to the policy rate set by the central bank. If the 10-year is meaningfully above the policy rate, investors expect rates to stay supportive of growth; if it sits below, the market is pricing rate cuts ahead.
Next, check the 2s10s and 3m10y spread tiles. Green numbers mean the curve is sloping up in the normal way (longer bonds yield more). Red numbers mean the curve is inverted — long bonds yield less than short bonds, which historically precedes a slowdown. The deeper the inversion, the stronger the warning signal, although the lag between inversion and recession typically runs 12-24 months.
Finally, the recession probability at the top combines the 3m10y spread with the NY Fed's statistical model. A reading above 30% is the conventional caution threshold; above 50% historically meant a recession was the base case within a year. For non-US countries this is a useful comparative signal but the exact level should be read with care.
Interpreting the NSS parameters for this country
The four estimated betas decompose the curve into orthogonal factors. β₀ is the long-run level — the asymptotic yield as maturity goes to infinity, interpretable as the market's terminal nominal anchor (steady-state real rate plus expected inflation). β₁ is the slope factor; a negative β₁ produces an upward-sloping curve while a positive β₁ flattens or inverts the front end. β₂ and β₃ govern two curvature humps controlled respectively by λ₁ and λ₂ years — the maturities at which each curvature factor peaks. Diebold-Li (2006) show β₀+β₁ converges to the instantaneous short rate and β₀ to the consol yield, providing direct factor-model intuition.
On the recession probability: the reading uses the Estrella-Mishkin (1998) coefficients calibrated on US post-war NBER data. For developed-market peers (Eurozone, UK, Canada, Australia, Switzerland) the cross-country mapping is broadly defensible, but the absolute level is indicative, not literal — local probit re-estimation (Moneta 2005 for the euro area; Chinn-Kucko 2015 for OECD comparators) typically yields slightly weaker, but still significant, predictive coefficients. The reading is best treated as a relative-rank signal across our nine-country set rather than an unconditional probability.
A final caveat: the spread input embeds both an expected-policy component and a term-premium component. When the ACM term premium is compressed by structural demand for duration (LDI flows, central-bank balance-sheet residuals, foreign reserve recycling), an inverted curve can flag elevated probability without indicating that aggressive easing is priced. Cross-checking the model against survey-based policy expectations and against the country's own forward OIS curve disciplines the signal.
What the ACGB curve is signalling
With the Reserve Bank of Australia’s cash rate at 3.85%, the Australian Commonwealth Government Bond curve currently traces a moderately positive slope. The 3-month bill yields just above the cash rate, the belly (3-5Y) sits in the 3.7-3.8% range, and the 10-year ACGB is at 4.28%. The 30-year long bond clears 4.60%. The curve has steepened over the past 18 months as the RBA has communicated a patient stance and markets have priced cuts deeper into the forecast horizon.
Inversion status and term spreads
The ACGB 2s10s is positive at 50+ bp — among the steepest in the developed world. The 3m10y spread is also positive, though narrower. The Estrella-Mishkin recession-probability reading is in single digits, consistent with the curve’s healthy slope and the relatively benign Australian macro picture: domestic demand has cooled but unemployment has stayed contained.
What the curve says about RBA expectations vs market pricing
The ACGB curve embeds these views:
- Markets price roughly 50 bp of cuts from the RBA over the next 12-18 months, with the bulk concentrated in the second half of 2026.
- The 10-year yield at 4.28% suggests an average expected cash rate around 3.6-3.8% over the next decade — consistent with a neutral nominal rate in the high-3% area, which has historically been the RBA’s working assumption.
- The long-end term premium (30Y minus 10Y, ~30-35 bp) is moderate, reflecting limited concern about Australian sovereign credit or long-run inflation drift.
Nelson-Siegel-Svensson fit
Australia’s curve fits the standard NSS template cleanly: a level factor near 4.5%, a moderate negative slope factor reflecting the front-end pricing, and modest curvature. The fit residuals are small enough that NSS can be used reliably for off-the-run interpolation — useful for derivatives pricing and pension liability discounting. See the NSS methodology page.
Cross-references
- Reserve Bank of Australia overview — cash rate, board statement, meeting schedule.
- Real interest rate tracker — AUD real rate vs. global comparison.
- Recession probability dashboard — Australia in context.
- Nelson-Siegel-Svensson methodology.