17/04/2024 09:32

First Up

Bond markets have been struggling over recent weeks as inflations appeared increasingly “sticky.” Fed members kept telling us their preferred economic path is three rate cuts in 2024, but the futures market is painting a very different picture – a few weeks ago, a rate cut in June was all but pencilled in by traders, now there's only a 50% hope that Jerome Powell will announce a rate cut in July. Bond markets, both at home and in the US, have lost their dovish lustre of late.

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15/04/2024 09:08

Interest Rates / Bond Yields

Australian 3-year bond yields edged higher last week as hopes for rate cuts in the near future fade. Global inflation appears to be increasingly sticky, and this concern will increase if Middle East relations deteriorate further, sending oil prices higher in the process. In the short term, a test of 4% wouldn’t surprise us, but ultimately, we’re targeting another leg on the downside through 2024/5.

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08/04/2024 08:45

Interest Rates / Bond Yields

Australian 3-years continued to chop around last week, taking more of their lead from US data and Fed comments rather than local news. Local bonds have remained in a tight holding pattern since the start of 2024, trading between 3% and 4%. Our preferred scenario is we see another leg lower by yields through 2024/5 of a similar magnitude to the decline from its post-COVID high in November last year.

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02/04/2024 09:07

Interest Rates / Bond Yields

US bonds appeared to forget Friday's PCE print last night, focusing instead on the manufacturing PMI, which increased to 50.3 last month, the highest and first reading above 50 since September 2022, up from 47.8 in February, i.e. the likely trigger for stocks to fall away throughout the session. The US economy remains strong, which could delay the Fed's timing of rate cuts; at MM, we believe cuts are coming but probably at a slower pace than many expect/hope for. 

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25/03/2024 08:39

Interest Rates / Bond Yields

Australian 3-years edged lower last week, taking more of its lead from the FOMC than the strong local employment data. However, a cursory glance at their chart shows they’ve been in a holding pattern through 2024, trading midway between 3% and 4%. Our preferred scenario is that we will see a test of the former over the coming months.

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18/03/2024 09:05

Interest Rates / Bond Yields

Australian 10-years edged higher last week following the robust US economic data, but they appear comfortable around 4%, where they’ve spent most of 2024. Over the last 18-months, the 4% area has been the average yield for the 10s, with 1% swings either side. Our preferred scenario moving forward is another foray on the downside, which would unfold if the RBA gets inflation firmly under control.

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11/03/2024 09:00

Interest Rates / Bond Yields

Australian shorter-dated yields edged lower following Powell and Lagarde's dovish rhetoric. As the saying goes, “Don’t fight the Fed.” In this case, it’s the Fed, ECB, and BOE! If we see a market-friendly US CPI this week, bond yields could easily make fresh 2024 lows.

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19/02/2024 09:15

Interest Rates / Bond Yields

Local bond yields ended last week slightly higher following the strong inflation prints in the US; the Australian futures are pricing in a cash rate of 3.94% in December, or 1-2 rate cuts before Christmas. Our jobless rate kicked above 4% for the first time in 2-years, which proved enough to offset most of the influence of the strong US economic data – the cooling of the Australian labour market felt inevitable under the weight of rising interest rates, although one month’s data doesn’t change a trend.

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12/02/2024 09:47

Interest Rates / Bond Yields

The main news for credit markets last week was the RBA leaving interest rates unchanged after its fresh 2-day style meeting. However, Michele Bullock has left the market in no doubt as to their current stance on future rate cuts - “An inflation rate with a “4” in front of it is not good enough and still some way from the midpoint of our target”.

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05/02/2024 08:56

Interest Rates / Bond Yields

Australian credit markets last week were dominated by a lower-than-expected CPI number, with Q4 inflation printing  0.6% vs expectations for 0.8% QoQ, while YoY, the rate of 4.1% was below the 4.3% expected and down from 5.4% in the prior quarter. However, some of the gloss of the local market-friendly data was taken out of the market by Friday's solid US employment data, which sent US yields higher.

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