17/06/2024 08:47

Interest Rates / Bond Yields

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.

Read more

13/06/2024 08:51

Global Markets

The US Tech Sector again led the broad market up to fresh all-time highs, with Apple (AAPL US) and Nvidia (NVDA US) both catching the eye, advancing +2.9% and +3.6%, respectively. The Feds news wasn’t great overnight, but all they really did was continue to “kick the can down the road”. Five rate cuts by Christmas 2025 will still deliver a large tailwind for equities over the next 18 months. We are now adopting a “wait and see”  approach to US stocks as they approach our initial target area.

Read more

11/06/2024 08:51

Interest Rates / Bond Yields

Australian 3-year bond yields remain above 4% after Friday's strong US Jobs Report, but it's tough to describe the price action as anything more than a holding pattern as investors and traders alike second-guess when the RBA will cut interest rates, rather than if they will cut. It's been a year of speculation around when the RBA will move; it could be another 6-12 months before we get a definitive answer.

Read more

30/05/2024 09:18

Global Markets

US stocks struggled overnight as rising bond yields weighed on risk assets. The Fed’s beige book gave further insight into the US economy, which, while not surprising, wasn’t good news for stocks. The report said prices rose at a modest pace while consumers pushed back against additional price increases, which led to smaller margins as input prices rose. Retailers are offering incentives to shoppers as “price growth” is expected to continue at a modest path.

Read more

27/05/2024 08:49

Interest Rates / Bond Yields

Australian 3-year bond yields edged higher last week as the Fed Minutes weighed on bond prices, pushing yields higher. The magnetic pull of the 4% level continues to control this pivotal market – it’s now almost 12-months since the Australian 3s moved to 4%, and after much jockeying and speculation, they're still here! We continue to believe the next meaningful move will be on the downside, with the when being the “million dollar” question.

Read more

24/05/2024 09:22

Global Markets

US stocks endured a tough day at the office overnight, with the Real Estate and Utilities faring the worst after the Fed minutes saw investors reduce bets for rate cuts into 2025. Also, we saw firm economic data, which compounded the nervousness post Fed with Services and Manufacturing data printing strongly. Nvidia (NVDA US) soared after delivering a solid earnings beat, but it wasn’t enough to turn around the concerns arising from the Fed Minutes - note that the stock is to undergo a 10-1 split; hence, it won’t be trading above $US1,000 for long!

Read more

20/05/2024 09:12

Interest Rates / Bond Yields

Australian 3-year bond yields again fell last week as the ducks aligned for the Doves. The US CPI came in lower than expected, following on from signs that the Australian jobs market was softening. The local futures market is now looking for a rate cut by February in 1Q of 2025 with scary hikes back off the table, a welcome relief for mortgage holders.

Read more

16/05/2024 09:21

Cooling US inflation is a great sign for rate-sensitive stocks

US short-term bond yields tested multi-week lows overnight following the cooling US CPI, but they are still nowhere near as dovish as they were back in January/February. Last night's numbers were undoubtedly encouraging, but more proof will be required for credit markets and, most importantly, the Fed to conclude that inflation’s contained. Bond markets are often thought to be smarter than equities, as they are significantly larger, and at the moment, they are saying stocks are getting a touch overly optimistic. We believe stocks will ultimately be proved correct, but we must remain cognisant that any deterioration in the interest rate picture could easily see stocks pull back to their April lows.

Read more

13/05/2024 09:18

Interest Rates / Bond Yields

Australian 3-year bond yields again slipped lower last week after the recent “less hawkish” news from the RBA and Fed, but they will need some concrete signs that inflation is again turning lower before a decline back towards their 2024 3.5% low can unfold. The US CPI on Wednesday is likely to dictate terms for most bond markets this week, but we felt there were some signs last week that a degree of weakness is entering the Australian economy.

Read more

06/05/2024 09:20

Interest Rates / Bond Yields

US policymakers left rates unchanged last week, and although they did reiterate that inflation is not beaten, the important takeaway which markets latched onto was the Fed's view that their next move is likely to be a cut, as opposed to a hike. However, we are conscious that the markets are still looking for two cuts into early 2025; future inflation prints will need to fall towards the Fed's 2% target from today's 3.5% before confidence will return that more will be delivered.

Read more