Governor Michele Bullock described bond market moves as orderly at her 29 September media conference, a measured position that sits alongside the RBA's wider warnings about global financial vulnerabilities.

A handful of words from Governor Michele Bullock captured the Reserve Bank of Australia's (RBA) posture on bond markets at the end of September: "not alarmed, but we are alert to it."

The remark came at the media conference on 29 September 2026, the afternoon the Monetary Policy Board raised the cash rate target by 25 basis points to 4.60 per cent. In full, Bullock said: "the bond markets are reacting in an orderly way." She followed with: "So at this stage, I'd say not alarmed, but we are alert to it."

The phrasing is deliberately balanced. It acknowledges that markets are moving, rejects the idea of disorder, and signals that the central bank is watching. What follows explains why bond markets matter to the RBA, what officials have said about them in recent months, and what remains unknown.

Why bond markets matter to the cash rate

The cash rate is the RBA's main policy lever, but RBA officials have made clear they also look at financial conditions more broadly when judging how restrictive policy is in practice.

Assistant Governor (Financial Markets) Christopher Kent addressed this directly in his speech "The Restrictive Stance of Monetary Policy" in Sydney on 13 August 2026. He said: "our assessment is that financial conditions overall are somewhat restrictive". At the time, with the cash rate at 4.35 per cent, he added: "The current cash rate is around the top of the range of central estimates of the neutral rate".

Crucially, Kent noted that AI investment and higher offshore bond yields could make a given cash rate less restrictive. In other words, global bond markets are not just a financial stability issue for the RBA; they feed into how the Board judges the setting of its own policy rate.

What "orderly" does and doesn't tell us

Bullock's characterisation is a judgement about how markets are functioning, not a forecast of where yields will go. The material available from the RBA does not set out specific bond yield levels, which markets she was referring to, or the size of any recent moves. Her remark is best read as a qualitative assessment at a point in time: "at this stage".

What the record does show is the context in which she spoke. The Board's statement that day said inflation remained elevated and that some upside risks had materialised, including further disruption to global oil supply from the Middle East conflict and strong AI-related demand pushing up technology-goods prices. Headline inflation, as measured by the monthly Consumer Price Index, was 4.0 per cent over the year to the August month. Underlying inflation, which Bullock put at about 3.5 per cent for the past six months, was also above the 2–3 per cent target. The trimmed mean was 3.6 per cent in the June quarter.

Against that backdrop, Bullock was careful not to over-signal. She also said: "I'm not going to give you forward guidance."

The stability lens: global vulnerabilities are mounting

Two days after the decision, on 1 October, the RBA released its Financial Stability Review (FSR) for October 2026. Its media release described Australia's financial system as showing "a good degree of resilience, but global and operational vulnerabilities continue to mount".

Among the threats the FSR identified were:

  • geopolitical tensions
  • global financial market vulnerabilities
  • advances in artificial intelligence
  • critical service provider disruptions.

The inclusion of global financial market vulnerabilities provides the institutional backdrop to Bullock's "alert" stance. The FSR did not, in the material available here, put a number on the likelihood of a disorderly market episode, and this article does not attempt to.

How the system has been tested

The FSR offered some evidence on how parts of the financial system might cope under pressure.

On banks, the common equity tier 1 (CET1) capital ratio was 12.4 per cent in June 2026. In a stress scenario where housing and commercial property prices fall 20 per cent, unemployment rises to 6.3 per cent and the cash rate rises to 5.6 per cent, the CET1 ratio would fall to around 11.6 per cent. The RBA said banks could absorb losses while continuing to extend credit.

On superannuation, an APRA stress test found that members switching to cash at four times the quarterly volume seen at the start of the COVID pandemic could be largely funded from international equity portfolios. All participating funds maintained adequate liquidity.

On non-banks, the FSR said risks were "contained by their relatively small size", with non-banks accounting for around 6 per cent of financial system assets. It noted, however, that some private credit funds have had to enforce redemption limits.

Exchange rates: the other side of the coin

The exchange rate is another part of the financial conditions picture. Kent noted in August that the trade-weighted dollar had risen about 5 per cent since the start of 2026, and that "A higher exchange rate helps moderate inflation by lowering the domestic price of imports."

Bullock reinforced that on 29 September: "according to our research, in fact, the most important channel is the exchange rate channel." At 4.00 pm on 9 October 2026, the Australian dollar was at US$0.6979 and the trade-weighted index stood at 64.8.

The bottom line

Bullock's "not alarmed, but we are alert" stance describes bond markets that, in the RBA's assessment on 29 September, were moving in an orderly way. It sits within a broader picture in which the RBA's own stability review warns that global vulnerabilities continue to mount, and in which Kent has flagged that higher offshore bond yields can change how restrictive a given cash rate is.

The RBA has not published further detail on specific yield movements in the material reviewed here. The next opportunities to hear from officials include the September meeting minutes on 13 October, Kent's interview on 18 October and fireside chat on 19 October, and Deputy Governor Andrew Hauser's appearance on 21 October. The next cash rate decision is due at 2.30 pm on 3 November 2026.