Weak employment prospects boost the expectation of the Australian Reserve Bank pausing interest rate hikes, leading to a sharp steepening of the yield curve and increased trading activity.

According to the Wisdom Financial APP, a weak employment report released by Australia on Thursday has led to a surge in steepening trades in the yield curve, as investors are betting that the Reserve Bank of Australia is close to ending its rate hiking cycle. On Thursday, the trading volume of the September Australian bank bill futures contract doubled compared to the previous trading day, while the trading volume of the June contract doubled. These futures are used to trade views on the yield curve, allowing investors to bet on whether the spread between short-term and long-term interest rates is widening or narrowing. As of the close on Thursday, the market pricing for rate hikes between the RBA meetings in June and August had narrowed to 11.5 basis points, down from 15 basis points earlier in the day.