Commentary courtesy of Spectrum Asset Management’s Lindsay Skardoon.
| Close | Prev Close |
Change | |
| Aust. 90 day bank bill% | 1.94 | 1.93 | 0.01 |
| Aust. 3 year bond%* | 2.08 | 2.15 | -0.07 |
| Aust. 10 year bond%* | 2.73 | 2.80 | -0.07 |
| Aust. 20 year bond%* | 3.15 | 3.21 | -0.06 |
| U.S. 2 year bond% | 2.26 | 2.25 | 0.01 |
| U.S. 10 year bond% | 2.82 | 2.84 | -0.02 |
| U.S. 30 year bond% | 3.06 | 3.10 | -0.04 |
| * Implied yields from Mar 2018 futures | |||
LOCAL MARKETS
Bonds should rally as more investors purchase bonds in response to weaker equity markets.
U.S. BOND MARKETS
Markets over the last few days have been traded relatively thinly but the consistent theme has been taking risk off the table and watching bonds rally just a little. For the moment bonds look like a relatively-safe investment. And that probably will be the case for a while.
On the day, bonds rallied because of several factors. Strangely, lack of supply caused 30-year gilts to rally and are now around 1.822%. Asian bonds were sold because of trade war fears creating demand for U.S. treasuries which are now becoming the safe haven trade. All the while treasuries were being bought because the equity market was selling, talk of tariffs leading to an economic slowdown and geopolitical risk was driving investors to reconsider bonds. All this uncertainty has driven the treasury market and flattened the yield curve. The bond market was not so concerned about growth as the short end did not react that much. Most of the movement was in the longer maturities suggesting the bond rally was more about risk!
