It started out as a whisper in early 2017, but by early 2018, it had reached a roar: “inflation is coming,” they yelled. After a decade mired in sub-par growth and near-zero interest rates, consensus agreed things were returning to normal. Portfolios repositioned, and rate-sensitive stocks repriced. But nearly six... Show More
The Australian Commonwealth budget announcement overnight has confirmed the size and trajectory of the Australian government bond market. The Australian Office of Financial Management’s (AOFM) updated issuance plans also indicate that bond supply will remain persistent. This acts to underpin capacity in the bond market for large investors seeking access... Show More
The Bank Bill – Overnight Indexed Swap (OIS) spread is a keenly watched risk measure in fixed income markets that has experienced a significant widening in recent months, both in Australia and in overseas markets (where LIBOR is the equivalent rate to the Aussie bank bill rate). Show More
This time last year we wrote on Livewire that inflation and volatility charts were the ones we were watching most closely. Following the recent surge in both measures, Livewire got in touch to ask what we expect from here, and what investors can do about it. Show More
Recently, I returned from a study tour of the world capitals of global macroeconomic policy. This report includes my observations from the road after meeting with key policy making officials, as well as economists and market participants across the US, EU, UK, China and Japan. In short, the current market... Show More
Ardea have been monitoring markets closely over the past 24 hours as you can imagine, and while the volatility has been significant, we think overall these events are favourable for markets and good for investors. Show More
Hi Han, correct, a reduction in demand for USD would increase supply, thus lowering rates when looked at in isolation. In addition, reduced demand for USD would also likely lower the exchange rate against other currencies. Thus for investors to be willing to hold USD, they would likely require higher interest rates to compensate. On top of this, a reallocation of reserves would also reduce demand for US bonds, including Treasuries. Reduced demand for bonds means a lower price, and thus a higher yield. This would raise long-term interest rates as well. The combined effect of these multiple influences can be difficult to gauge, but at a very general level reduced demand for an asset means a higher rate of interest must be paid to attract investors.