The trend of the Government Bond interest rates would indicate that the expectations are that the economy is slowing. The 3 year bond rate closed today at 4.58%, which is below the current cash rates. The implication from the market is that there is an expectation of interest rate falls. Most of the current commentary is that we are all waiting for interest rates to rise. The RBA could well increase interest rates, but that will surely put a brake on our economy given the current sentiment.
The recent spike in rates on the 1st July 2011 was the end of QE 2 in the United States. The sell off was short lived, with the downtrend re-establishing itself both in Australia and the US. The current 10 year US rate is 2.96%, having spiked to 3.20% on the 1st July.
Update: 11:00am 12th July - 10 year bonds - 4.99% , 3 year bonds - 4.47%