3 Oct – 7 Oct 2016


Yields rose across the curve, by larger amounts as one went further out along the curve. They were driven primarily by offshore events in Europe and the US, although movements in Australian yields tended to be of a greater magnitude. The result was sharply-steeper yield curve and the 3y/10y spread rose 7bps to 54bps while the 3y/20y spread increased by 11bps to 115bps.

Westpac’s Damien McColough thinks the front end of the curve is “likely to remain relatively well anchored” because the market will not totally discount further RBA rate cuts but the long end will be driven by offshore events and so  “the curve is likely to steepen further.” This is not universally-held view and ANZ Research has advised investors to position themselves for a flattening of the curve.