The Australian three-year bond yield continued to rally back above 4% last week as economic data remained solid and central banks hawkish – the same song for most of 2023. At this stage, we need to see them back below 3.75% before becoming confident that our forecasted decline is underway.
- No change, we continue to look for Australian short-dated yields to eventually re-test 3% in 2024 but acknowledge they aren’t demonstrating any signs of failure at this juncture.
MM remains bullish toward Australian 3-Year Bonds, negative on yields
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US 2-years again closed on their lows unchanged as the “safety bid” appeared to get the better of the hawkish central banks into the weekend, i.e. higher bond prices equate to lower yields. The 2s have continued to rotate around the 5% level since early July, and while we see no reason to fight this equilibrium until further notice, our belief remains the next significant move will be on the downside.
- No change, we are still targeting a retest of ~4% through 2024 by the 2s but for now they are comfortable ~5%.
MM remains bearish on short-dated US bond yields over the medium-term
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