Commentary courtesy of Spectrum Asset Management’s Lindsay Skardoon.
| Close | Prev Close |
Change | |
| Aust. 90 day bank bill% | 1.77 | 1.77 | 0.00 |
| Aust. 3 year bond%* | 2.13 | 2.15 | -0.02 |
| Aust. 10 year bond%* | 2.86 | 2.86 | 0.00 |
| Aust. 20 year bond%* | 3.30 | 3.27 | 0.03 |
| U.S. 2 year bond% | 2.25 | 2.26 | -0.01 |
| U.S. 10 year bond% | 2.92 | 2.95 | -0.03 |
| U.S. 30 year bond% | 3.21 | 3.22 | -0.01 |
| * Implied yields from Mar 2018 futures | |||
LOCAL MARKETS
Bonds had a steady day and I expect the Aussie bonds to be similar. Expect some drift on the day.
U.S. BOND MARKETS
The bond market sell-off has stalled for the moment. For investors, the big concerns will be around the direction of rates and bond yields and just how high they will rise. The expectation is for another 3 rate hikes in 2018 and if that is the case then a 10year around 3.20% or higher should not be unexpected.
For bond investors, the 7-year auction was well supported by China and Japan and other sovereigns. These investors took the largest share since September. The interest in U.S. rates may have been spurred after the ECB minutes were released and these minutes indicated that the policymakers believe it is premature to signal normalisation of rates as inflation remains weak and growth still appears to have the wobbles from time to time. For Credit Suisse, a 10 year bond rate of 3.5% is a cause for concern.
