Australian bond curve flattening gets serious

Tuesday, 27 January 2015

Australian bond yields curve continued to flatten over the past few days. The two year yield fell to as low as 2.04% overnight, close to fully pricing two rate cuts, but currently sits at 2.11%. The five year is chasing it down even faster and today is at just 2.19%:

Thus the 2/5 year spread is down to only 8bps:

This is the flattest curve in 2.5 years. If the RBA doesn’t cut next week (it probably will as iron ore gets hit again) it’s a good bet that the curve will invert and recession calls will proliferate.

The full text of this article is available to MacroBusiness subscribers

$1 for your first month, then:

$24.99 / month

$249 / year

Cancel at any time through our billing provider, Stripe

About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.