Australian 3-year yields slipped back under 4% last week as cooling US inflation boosted bonds, sending yields lower – core CPI increased 0.2% on the month and 3.4% from a year ago, the slowest pace in more than three years, beating analysts’ expectations of 0.3% and 3.5%, respectively. The data was not a huge beat, but for a nervous global bond market, it was extremely welcome. However, the Fed maintained realistic expectations for investors, announcing in the same week they now expect only one rate cut in 2024 and four in 2025. It is the same story: rates are going lower; it’s just a matter of when.
- We are targeting an eventual move by the local 3s down towards 3% in 2024/5, with recent data becoming increasingly supportive of this view.
- Such a move would be bullish for stocks, assuming we don’t see an aggressive domestic/global economic slowdown.
MM remains bearish toward Australian bond yields in the medium-term
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US and Australian bond yields turned lower last week, encouraged by the soft US CPI and no surprises from the mid-week Australian employment data. Like many markets, the 10s are rotating, looking for direction, with both spending most of 2024 in the tight band between 4 and 4.5%.
- We’re ultimately targeting a move down towards 3.5% by the Australian and US 10-year bond yields.
MM is bearish towards bond yields medium-term
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