06 Jun – 10 Jun 2016


This week the yield curve flattened again except this time the move was more pronounced. The 3-10 year spread fell 12bps to 52bps as once again short end yields remained relatively stable while yields at the long end fell precipitously. There was a similar result in the 3-20 year spread as 20 year bond yields also fell 12bps, with a corresponding 12 bps fall in the spread. Westpac expects the “weight of money” to continue to be a driver for lower offshore bonds yields, which then typically flow through to domestic yields. BT Investment Management suggests the 10 year to 20 year part of the yield curve should be watched closely in coming months as a steepening here might mean foreign capital providers are demanding higher returns from the risk of investing in Australia.