Rising speculation of a rate hike in February has caused Australia's bond yields to increase.

Australian bond yields rose sharply on Thursday as markets increasingly speculated on the possibility of an interest rate hike by the Reserve Bank of Australia as early as February. Government bond yields across the curve rose by 4-6 basis points, with 3-year bond futures leading the way to their highest levels since mid-January. The yield spread between U.S. and Australian 10-year bonds widened by about 5 basis points to 62 basis points. Su-Lin Ong, Chief Economist at RBC Capital Markets, stated that financial markets have already priced in expectations of a 5 basis point rate hike in February, while at the opening of the day there were no indications of such expectations. She added, "The bulls are giving up. Today, overseas investors are asking me about the possibility of a rate hike in February."