Commentary courtesy of Spectrum Asset Management’s Lindsay Skardoon.
| Close | Prev Close |
Change | |
| U.S. 2 year bond% | 2.06 | 2.10 | -0.04 |
| U.S. 10 year bond% | 2.86 | 2.82 | 0.04 |
| U.S. 30 year bond% | 3.16 | 3.13 | 0.03 |
| 90 day bank bill% | 1.76 | 1.77 | -0.01 |
| Aust. 3 year bond%* | 2.13 | 2.18 | -0.05 |
| Aust. 10 year bond%* | 2.86 | 2.89 | -0.03 |
| Aust. 20 year bond%* | 3.28 | 3.30 | -0.02 |
| * Implied yields from Mar 2018 futures | |||
U.S. BOND MARKETS
Bond rates are set to surge again, especially if the deficit widens and as such the GDP numbers become important because any slowing will see bonds rise in yields and equity sell. The free cash is leaving the system, and this is the massive error in the budget forecasts. The new normal is not the norm. Bond investors will fret over increased issuance, increasing deficits regardless of where inflation is, but under this scenario inflation rises.
LOCAL MARKETS
Bonds should be sold a little today. The equity advance should see bonds selling and given the AUD 10-year is now 1bp through the U.S 10-year this could become a selling point. I expect that bonds could sell a few points today.
