5 Dec – 9 Dec 2016

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The yield curve has continued to steepen with the 3y/10y spread moving from 84bps to 85bps and the 3y/20y spread increasing from 148bps to 152bps.

Westpac head of Global Capital Markets Strategy, David Goodman said 3 year ACGB’s “are unlikely to trade materially more than 50bps over the current cash rate”. Unless short end rates drift down, perhaps in light of the weak Q3 GDP figures or something such as that, the gradient of the yield curve will continue to be driven by long end yields, which in turn are driven by US yields. In other words, work out where US 10 year bond yields are going first.

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