Aussie bonds boom again as NAB mulls full rate cut cycle

See the latest Australian dollar analysis here:

Macro Afternoon

Everyone except the lunatic RBA is racing in one direction now, including NAB’s Alan Oster:

“We now think that the RBA will make two rate cuts in 2019.

Growth appears to have lost significant momentum, placing at risk further improvement in the labour market at a time when inflation poses little constraint on policy and financial stability risks have abated.

We have pencilled in one 25 basis point cut to 1.25% in July and a further 25 basis cut to 1% in November.

With monetary policy being forward looking, we think the RBA will act this year on a ‘no regrets’ basis to boost economic activity and to offset a likely increase in unemployment in 2020.

It is possible that further policy adjustment will be required in 2020.”

Yep, my bet is no fewer than four rate cuts over the next eighteen months as the economy refuses to bounce with any vigour.

As usual, AUD is bid in Asia for no reason. This happens with such regularity that something structural must drive it. Perhaps its the RBA’s nonsense or Mr Watanabe or the Kangaroo bond market. I just don’t know:

Bonds are roaring with much more ahead. I see the long end at 1% next year:

XJO is sagging:

Dalian is another nothing burger as Big Iron cops it on RIO downgrades:

Big Gas is down too:

Big Gold is still a sell. Watch out for tonight’s NFP:

Big Banks have reversed course as their valuations look stupid approaching 14x forward EPS into a housing crash:

Big Reality is not excited by RBA action either:

Avagoodweekend and, if you’re on the roads, watch out for idiot economists driving trend lines into head on crashes.

David Llewellyn-Smith is chief strategist at the MB Fund and MB Super which is long international equities and local bonds that will benefit from a weakening Australian economy and dollar so he is definitely talking his book.

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David Llewellyn-Smith
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    • GeordieMEMBER

      Just think of all that text that will have to get a re-write; no copy-paste will do here! Hard yakka, that.

      • proofreadersMEMBER

        They’ll be too busy writing cheques on the CLF, to shore up the private banks’ hot-book funding as it walks out the door?

    • Personally too little too late. Rates should have gone up in 2010, we wouldn’t be in the position that we are in now. I say let the chips fall where they may. Speculation in property and anything to do with it is nothing short of that. We need a good recession to clear a level playing field for future generations. Lets hope its a real big one too. When beautiful places around Australia are ruined in the name of development a growth in most cases just jamming them in, then there is something very rotten to the core. This great Australian past time gets manipulated all the way to the highest levels of Government. Cutting rates from record lows will have no effect in a falling market that has accelerated and is picking up speed. POP……..

  1. Poor Phil…

    All the cool kids are coming over to our side of the playground. Soon he will only have Bloxo and Yetsenga to hang out with…

  2. Just another senior bank dude talking his book…given a large part of his bonuses are no doubt dependent on writing more loans. Never trust a banker who’s advocating for rate cuts…just as you wouldn’t trust an insurance salesman to give an honest assessment of whether or not you need insurance.

  3. No way they are going to cut only 0.25% before Christmas. That cut is going to be at least 0.75%

    RBA is left with only two cuts, one after elections so Jun or July and than one in October- November to the “zero” – which is in our case 0.25%