Morning Report Thursday 23 April 2015
**As we remember the fallen tomorrow, the Weekend Report will be released on Sunday.
The cracks are widening in the “yield play”
Yesterday we learnt that inflation in Australia was stronger than economists had thought, generating a strong rally in the $A and backflip in belief that interest rates would continue to fall. The turnaround on the future move in rates has been dramatic, in early July, the market was confident of two rate cuts into 2016, now its losing confidence that we may get one at all. The overnight 6% surge in Iron Ore, while excellent news for our long Fortescue position (FMG), it is potentially another nail in the coffin for lower rates.
• The market is now 50-50 of the belief that we will get a rate cut to fresh all-time lows of 2%.
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