The bond yield picture is very similar in the US as at home with the yield curve flattening i.e. the differential between shorter & longer- dated yields narrows. This is occurring as investors are expecting rate hikes by the Fed / RBA but they’re not convinced that the economic recovery will be strong enough to create inflation hence the scary word “recession” comes to mind – not surprisingly historically it’s an awful backdrop for stocks.
Were on the fence at the moment with regard to how yield spreads unfold next year but we do believe rate hikes are looming fast.
