The financial world is awash with news reports, economic statistics and commentary about the US economy. For people in the US, this makes sense. But what about those of us living in Australia, why should we care?
The answer is because the US market sets the tone and often direction for other markets around the globe. There is a relatively high correlation where, if the US stock market is buoyant, then typically the Australian share market is too. If there is a spike or plunge in US yields then almost certainly Australian yields will do the same. Global investors now seek to exploit the relativities between markets and this has increased the immediacy of response to market movements. This even happens when different economies are in different phases. For example, the US is contemplating a rate rise and their unemployment levels are falling. Contrast this with Australia where our unemployment rate has risen to post-GFC highs and markets are pricing in one further cash rate cut.
YieldReport’s focus is on the bond market. A quick look at ten year Australian and US yields side-by-side determines that the relationship between the two markets holds quite strongly over time, despite differing economic circumstances. Below is a chart of Australian and US rates over five decades, long enough for readers to be confident of the data covers a few business cycles and avoids “cherry-picking”. 
