Commentary courtesy of Spectrum Asset Management’s Lindsay Skardoon.
| Close | Prev Close |
Change | |
| Aust. 90 day bank bill% | 1.97 | 1.96 | 0.01 |
| Aust. 3 year bond%* | 2.13 | 2.11 | 0.02 |
| Aust. 10 year bond%* | 2.72 | 2.71 | 0.01 |
| Aust. 20 year bond%* | 3.11 | 3.11 | 0.00 |
| U.S. 2 year bond% | 2.32 | 2.29 | 0.03 |
| U.S. 10 year bond% | 2.86 | 2.84 | 0.02 |
| U.S. 30 year bond% | 3.09 | 3.08 | 0.01 |
| * Implied yields from June 2018 futures | |||
LOCAL MARKETS
Bonds should be steady on the day. With a looming rate hike in the U.S. bonds may soften later in the week.
U.S. BOND MARKETS
Bonds were able to rally on the day and that probably had more to do with uncertainty surrounding the equity market which had a plunge. The big bets are on for a flattening yield curve as over the past few weeks traders have upped the shorts in two-year futures whilst the ten-year contracts have seen some 90,000 shorts cut. This effectively means traders are betting on a flat yield curve. Today was a risk off day however if the markets get the jitters over a possible slowing economy then there is more at risk than there appears. A slowing economy would place the Fed in a very difficult position with a rapidly widening deficit, increased issuance and possible inflationary effects from imposed tariffs.
