While the equity markets sail blithely on, there are signs that the crunch under way in Australia’s terms of trade is beginning to strain interest rate markets. The Credit Suisse rate futures market for the next twelve months has added more than one cut in the past week or so:
And rate path probabilities from Bloomberg have also shifted to more cuts sooner, namely 25bps in October and December:
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That seems more than reasonable to me. Whether it’s the end of the cycle will then depend upon the length of any Chinese rebound.
