Australian 10-years edged higher last week following the robust US economic data, but they appear comfortable around 4%, where they’ve spent most of 2024. Over the last 18-months, the 4% area has been the average yield for the 10s, with 1% swings either side. Our preferred scenario moving forward is another foray on the downside, which would unfold if the RBA gets inflation firmly under control.
- The local 10’s can test 3% in 2024/5, although the next downside leg likely needs an economic/central bank catalyst.
MM remains bearish toward Australian bond yields in the medium-term
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US bonds fell last week, sending yields higher. The hotter-than-expected PPI pushed short-dated bond yields back towards their 2024 high on Friday. The Core PPI, which strips out food and energy, gained 0.3%, while economists expected a 0.2% advance. The release compounded the CPI, which also came in slightly higher than expected earlier in the week, rising 0.4% on a monthly basis and 3.2% from a year earlier.
- No change; we are targeting a test of 3.5% by the 2s through 2024/5, as they correct the strong advance since mid-2021.
MM is bearish on US 2-year yields medium-term
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