And here comes the next Australian domino. As the global fixed interest market turns uber-bullish, Fed rate cuts are at best postponed and Australian sovereign bonds rally like nobody’s business, Australian bank bonds are going the other way, watching yields climb. The CBA CDS price jumped 7.5% on Friday to 78.5bps its highest level in 2015 and highest in eighteen months:
This was before Friday night’s carnage so expect more today.
It’s early, only a small move and certainly no crisis but it is firm evidence that the commodities and emerging market crisis will infect Australian bank credit spreads even as official interest rates fall.
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