The combination of last weeks strong local employment report and the rampant oil price has pushed the local 10’s back above 5% with nerves likely to be increasing into this week’s inflation print due on Wednesday. To put todays yield into perspective it, sits well above the long-term averages, i.e. 222 bps above the 10-year average and 143 bps above the 20-year average.
- We continue to believe that weakness in the Australian economy and a sharp pullback in housing will see the RBA sit tight, implying buying fixed rate bonds here is a good trade.
MM is cautiously bullish towards Australian 10s (yields lower)
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