Australia’s 10-year government bond yield fell to around 4.46%, as investors increasingly speculate that the Reserve Bank of Australia could begin reducing interest rates as early as February. This sentiment is driven by softer core inflation data, which has dropped to its lowest level since Q4 2021, nearing the RBA’s target range of 2% to 3%. Focus is now shifting to Australia’s upcoming quarterly inflation report, due next week, which may provide additional insights into the future direction of interest rates. Markets now imply around a 63% chance that the RBA will cut its 4.35% cash rate by a quarter point next month. Elsewhere, market participants are closely watching updates on the US President Donald Trump’s trade policies, particularly potential tariffs on China, Australia’s largest trading partner.