Australian bond yields surged higher on Friday as concerns of further escalation between the US ands Iran appeared to unleash the shackles, a move that was brewing for a few days in global credit markets as the oil price nudged US100. Last Thursdays strong employment report also didn’t help, lifting bets on a rate hike next month to ~40%, awful news for an already extremely fragile housing market. We believe the knock on implications of the fall in housing prices, and plunge in activity, is what will keep the RBA in wait and see mode.
- We believe bond traders are too hawkish “if/when” we get a resolution around the Strait of Hormuz, bond yields will quickly re-trace.
MM is cautiously bullish towards Australian 3s (yields lower)
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Australian 3’s v US 2’s and UK Gilts 2-year Bond Yields
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Australian 3’s v US 2’s and UK Gilts 2-year Bond Yields
