Highlights

  • Hauser said the rise in global long-term bond yields had several possible explanations.
  • He reported that Australian exchange settlement reserves were around AUD 200 billion.
  • He said market estimates of eventual system reserve needs were around AUD 70 billion to AUD 100 billion.

Rising long-term sovereign bond yields and the changing supply of central-bank liquidity were among the financial-market topics addressed by Reserve Bank of Australia Deputy Governor Andrew Hauser on 21 October 2026. Speaking at an investment conference in Sydney, he discussed how higher international yields might affect domestic financial conditions and described the progress of Australia's transition towards an ample reserves framework.

His comments reflected an assessment of current market functioning rather than an announcement of a new interest-rate setting or liquidity target.

Why Long-Term Bond Yields Have Risen

Hauser said increases in global long-term yields had been large and relatively sharp. He listed several possible explanations, including fiscal policy, AI-related borrowing, uncertainty, neutral interest rates and changes in term premiums.

He cautioned against treating one factor as established. In particular, he noted that inflation break-even rates had not risen as much as nominal yields, while some indicators associated with imminent sovereign credit distress had not moved markedly. He therefore did not regard an immediate debt-default explanation as conclusive.

Term Premiums and Neutral Rates

The Deputy Governor said the RBA's working assessment included some increase in term premiums and potentially higher global neutral rates. He distinguished the effects: higher term premiums can tighten financing conditions, while higher neutral rates can mean that a given level of policy rates is less restrictive than previously assumed.

He also acknowledged a complication for Australia if global neutral rates rose while domestic neutral rates were held lower by weak productivity. Such conditions could have implications for exchange rates. Hauser said the Bank was monitoring these questions and the possibility of disorderly global market adjustments.

Transition Towards Ample Reserves

Hauser described the RBA's move towards an ample reserves framework, under which the central bank supplies liquidity in response to market demand through its operations, rather than setting the quantity and requiring the market to adjust.

He said Australia was not yet near the point at which the level of reserves would create material scarcity. Demand at the RBA's open market operations was low, private repo rates remained below its operation rates, and short-term funding markets were functioning in an orderly way. He contrasted this with episodes of upward pressure in short rates seen in some other countries during balance-sheet reductions.

Current Reserve Levels and Planned Tools

According to Hauser, exchange settlement reserves were approximately AUD 200 billion. He put current market estimates of eventual required reserves at AUD 70 billion to AUD 100 billion, while making clear that the actual point had not yet been reached.

He also referred to a term repo facility that the RBA hoped to introduce in 2027 as part of its liquidity toolkit. The speech did not specify the eventual volume of reserves the Bank would maintain, nor did it report immediate disruption in Australian short-term money markets.

Key Insights

The discussion presented two related but distinct questions: how global bond-market moves affect Australian financial conditions, and how domestic money markets respond as central-bank reserves decline. Hauser described uncertainty around the causes of higher long-term yields but said short-term Australian funding conditions remained orderly at the time of the speech.