Charlie Jamieson

The volatility genie has now been released and is unlikely to go back in the bottle as late cycle fiscal expansion in the US combined with higher global funding rates from the US Federal Reserve will have markets on their toes going forward. Show More

Australian inflation has been below RBA mandate for all but one of the last twelve quarters. Any lift in inflation brings the RBA to hike which triggers a deflationary recession.

On Three Arguments Against a ‘Bondcano’ -

Andrew, CBs most certainly set short dated funding rates. Long dated rates are set by markets and inflation expectations. We are seeing a scenario currently where the market is forcing the FOMC hand. The market is addicted to stimulus and if CBs take it away the volatility will hardly be contained to fixed income. Fixed income will be the first asset class to go but if that decay is sustained that volatility will spread like wildfire. I agree with you. CBs are totally snookered. Look at what they do rather than say. QE1 ends, S&P drops 20% so they immediately launch QE2. That ends and S&P drops 19% so they go to twist. Talk of ending twist early and we have 'taper' tantrum so they immediately extend. Their is a policy floor at point (down 20%) let's hope data holds up so FOMC can deliver on all that chat and actually hike in Dec. I actually think bonds will rally after that, just like last Dec

On “Not a chance” of materially higher rates -

Angelo, one of the great benefits of bond investment is that returns are fixed at time of purchase. They can reval higher or lower over a bonds life, but assuming the credit quality of issuer is sound, the bonds provide income in all scenarios. You certainly don't have to realise losses.

On “Not a chance” of materially higher rates -