Australian dollar Icarus tumbles with yield spread

Wednesday 28 February 2018

The Aussie dollar fell last night but not as fast as collapsing yield spreads. As US rate hikes expectations firmed, the all spreads hit new wides:

The two year hit -28bps, the five year -32bps and the ten year the lowest since 1984 at -16bps on the monthly chart:

The gap between the 10 year spread and Aussie is now at its widest since the mid-1980s as well. That wedge is the result of the terms of trade:

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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.