The market had assumed the effective floor for rates was 0.5%, but Reserve Bank of Australia (RBA) Governor Philip Lowe indicated they could fall to 0.25% before it would consider unconventional steps such as buying government bonds.
Futures reacted by rapidly pricing in the risk of two further rate cuts from the current 0.75%, as opposed to just one. An easing to 0.5% was now fully priced by May next year, while a drop to 0.25% was seen as a 30% chance by November.
All of which helped three-year bond futures climb 5 ticks to a six-week peak at 99.320, implying a yield of 0.68%.
Yields on the cash 10-year bond dropped to 1.05% and further away from the November top of 1.34%.
Markets are not nearly so bullish on New Zealand, where a single quarter-point rate cut to 0.75% is priced as, at most, a 70% probability by late next year.
As a result, Aussie 10-year yields were now 28 basis points below NZ yields, compared to 11 basis points early this month.