Australian bond yields made fresh 3-week lows following yesterday’s CPI release, despite the ongoing geopolitical uncertainty around Iran. The inflation read should be soft enough to allow the RBA to sit on its hands for at least a few meetings to evaluate exactly how weak the Australian property market has become, and of course whether inflation really is under control. The 3s remain above the current cash rate, but if/when they start trading down towards 4.25%, it will be confirmation that bond traders agree with MM that the next RBA move could well be a cut.
- We continue to believe bond traders are too hawkish, assuming we get a “real” resolution around the Strait of Hormuz.
MM is cautiously bullish towards Australian 3s (yields lower)
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