Commentary courtesy of Spectrum Asset Management’s Lindsay Skardoon.
| Close | Prev Close |
Change | |
| Aust. 90 day bank bill% | 1.98 | 1.97 | 0.01 |
| Aust. 3 year bond%* | 2.18 | 2.14 | 0.04 |
| Aust. 10 year bond%* | 2.72 | 2.72 | 0.00 |
| Aust. 20 year bond%* | 3.11 | 3.10 | 0.01 |
| U.S. 2 year bond% | 2.30 | 2.34 | -0.04 |
| U.S. 10 year bond% | 2.88 | 2.90 | -0.02 |
| U.S. 30 year bond% | 3.11 | 3.13 | -0.02 |
| * Implied yields from June 2018 futures | |||
LOCAL MARKETS
Bonds should see a little improvement however the general trend appears for a slight rise in rates as markets ponder what normalisation of interest rates means. The rate hike in the U.S. may pressure the front end of the curve whilst the long end should see a little demand.
U.S. BOND MARKETS
Jerome Powell got his big chance to hike rates today and did not miss out on the opportunity. Where analysts were expecting a discussion around economics, Powell gave them a reason why he would be hiking three more times this year and perhaps another three next year. The path to normalisation is steeper.
Bond markets reacted to the hike in a sanguine manner. For the moment bonds are attractive but for how long? Concerns over rising bond supply and a widening deficit are now starting to weigh on the market.
