Australian Investment Blog

Australian 10-year bonds trading at an all time low yield There was plenty of news to consider discussing today from Warren Buffett investing $1bn into APPLE to oil trading at fresh highs for 2016 but its local interest rates that's catching most investors attention. Yesterday Australian 10 year bonds traded at their lowest level in history reaching an amazing 2.2%. To put this into context, and thinking back to the booming 80's this was bouncing between 12 and 14% - see chart 1. Investors should always remember the cyclical nature of markets when investing, taking on high leverage with rates at all time lows could prove very painful in years to come where a doubling in rates to ~4% would hardly register as a blip on the longer term road map Markets are now factoring in a 60% chance for two more rate cuts by early 2017 which equates to a significant 28% reduction in rates from the current official RBA rate of 1.75%. The most recent RBA minutes will be released today which will provide further insight into potential rate cuts for 2016/7. Equities have been enjoying this development on the rate front, since last month's surprise cut, pushing up stocks with sustainable yield. Australian 10-year bond yield Monthly Chart