Optimism in money markets is growing for the Reserve Bank of Australia to cut interest rates at its first board meeting of 2025, as traders reassess their global rate outlook.

The Australian three-year bond yield fell 5 basis points overnight to 3.9 per cent as bond traders dialled up their rate cut bets. Markets are now pricing in a 62 per cent chance of a rate cut in February from 55 per cent a day earlier. They are fully priced for a reduction in April.