Australian 10-year bonds trading at an all time low yield

Nicholas Forsyth

Market Matters

Yesterday Australian 10 year bonds traded at their lowest level in history reaching an amazing 2.2%. To put this into context, and thinking back to the booming 80's this was bouncing between 12 and 14% - see chart 1. Investors should always remember the cyclical nature of markets when investing, taking on high leverage with rates at all time lows could prove very painful in years to come where a doubling in rates to ~4% would hardly register as a blip on the longer term road map. Markets are now factoring in a 60% chance for two more rate cuts by early 2017 which equates to a significant 28% reduction in rates from the current official RBA rate of 1.75%. The most recent RBA minutes will be released today which will provide further insight into potential rate cuts for 2016/7. Equities have been enjoying this development on the rate front, since last month's surprise cut, pushing up stocks with sustainable yield. Link: (VIEW LINK)


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Nicholas Forsyth
Nicholas Forsyth
Director
Market Matters

Market Matters is an online investment and share trading advisory service designed for those that want to take their wealth further. We specialise in advice for active share market investors, including those new to the markets or those with a Self...

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