Aussie dollar hit, bonds rip, on emergency rate cuts

See the latest Australian dollar analysis here:

Macro Afternoon

The AUD has been unable to hold its overnight gains:

Bonds continue to rip towards  2016 yield lows:

Worryingly, XJO is no longer trailing a rising equity premium:

Big Iron is up:

Big Gas too:

And Big Gold:

But Big Banks are down:

As is Big Realty:

The driver is more bearish commentary from UBS:

Indeed, the only ‘positive’ data flow continues to be the labour market, with unemployment holding at 5 per cent and job growth continuing at 2.2 per cent on year.

With momentum clearly slowing, we expect the RBA to shift further in a dovish direction, and introduce an easing bias at the May meeting.

However, if the labour market softens earlier than we expect, and CPI is low, we can’t rule out an RBA cut in May.

The yield trade doesn’t work when there’s no profits!

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.

If the ideas above interest you then contact us below. 

David Llewellyn-Smith

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.

Latest posts by David Llewellyn-Smith (see all)


  1. Lower teh rates, it’s a bit like you’re coming down a big hill, with 2 pot calipers and solid discs, the brake fluid is old and you try to pull up the car quickly, but all you do is find your foot planted to the floor and the smell of cooking brakes and the unreassuring feel of brake fade as you veer closer to the set of red lights with doubt creeping in you’ll be able to stop in time before getting cleaned up by a semi heading they other way.

    Yeah rate cuts, good luck.

      • Mount Dandenong, racing down the hill with mates in my old 260z with 4 mates in the car, by the time we hit the bottom of the hill the brake fade became apparent, going 180km/h on a straight way (yes young and dumb) I decided it was time to pull up the anchor’s and realised I don’t have any brakes… Red light in the distance, somehow I managed to pull it up in time.

        if there is 1 thing modern cars have in spades over old cars, it’s good brakes!

      • Rain When I Die

        Mt Macedon – Straws Lane – XF Fairmont Ghia – car load of biggish blokes. Fanging. It’s about 10% downhill.

        Brakes. Errr. shiiiit, hold onto yer hats.

        Straight through the Woodend Hesket Rd intersection safely.

      • Heh Gav. Had an old ke30 rolla. Got some lost-behind-the-shelves, caked with dust $10 brake pads.

        Decided to wear them out as fast as possible. I was doing about 2kkm a week at that time. Deliveries.

        Anyhow, I swear they were asbestos. They could be billowing smoke, discs glowing in daylight, but not fade. It must have looked ridiculous but I was laughing so hard.
        I’d literally stomp on the brakes last possible fraction of a second before the stopping distance was impossible.
        Every time I got out, the discs were glowing. Pink Pink as they cooled.

        They lasted a week. From new to metal.

        Fun times. I miss being a 20yo loon :p

      • Old brake pads were indeed made with Asbestos… same with old gaskets etc..Unfortunately that’s made it really difficult to import vintage cars into Australia because they need to be declared free from asbestos, which can be in engine gaskets (including head gaskets), brakes, heat shielding, undercoatings etc..bit of a nightmare really..

        I still have video of a guy I knew back then who lived out in Montrose, he would do pizza delivery in the hills in an AE86 Corolla (SOHC) and was absolutely bat sh!t insane behind the wheel. Never did crash, but he died of a heart condition very young, was quite sad. I always thought he’d crash into a tree… it’s as if some people know they have a limited time and just go for broke.

      • Oh wow Gav, a small world maybe (mr shin?). I remember driving behind these blokes once in my MA61. Couldn’t keep up with him.

    • Yeah, but at the bottom of the hill you’re still trying to push your foot through the firewall. That’s what the RBA will do. Cut, cut cut, and then point at climate change.

      • proofreadersMEMBER

        Any excuse will do for these tossers, as long as someone else wears the blame for their crime?

    • My datto 1200 had 4 wheel drums. When those things fail you’re yabbadabbado stamping your feet through the floor.

    • I had a Skoda 120L that brake faded as i was coming down Mount Warning.
      For sure, thought I was going to die.

    • It sounds more like that twin-turbo V8 Alfa Romeo that burst into flames at Eastern Creek many years ago. 250+km/h going the wrong way down the drag strip and with a tiny set of brakes.

      • That’s the one. Watching it again I see it is even more appropriate. 270km/h and accelerating well past the braking point.

        I recall a fairly smart guy called Mario Torborac who had an insane GTR registered for that event. Mario did his calcs and withdrew from the event knowing full well the braking distance was too short even for the big ass braking system on his car.

  2. The jobs data holding suggests further fragmentation of the workforce. 1hr a week jobs for all!
    That is until it doesn’t; then unemployment to 10%.

  3. I’m getting inundated with fund managers, respectable and dodgy looking, wanting to offer some sort of:
    “Credit Income Trust……will offer investors a new way to access what is expected to be an attractive and reliable monthly income stream through a diversified exposure to domestic and global credit and fixed income assets. ….will offer investors access to credit and fixed income assets not typically available to individual investors.”

    “with high yield…..on bank like investments….backed by bricks and mortar….” this one even claimed “the sort of lending that banks love”

    Feels like pre GFC high yield fund hard-selling all over again. Offers of 1% on all funds invested to advisers too. It’s so good they need commission selling a banks won’t touch it…..8-10% stable returns though!

    • Yup, Avoid all that sh!t — and I mean ALL. Time to buy is when there’s blood on the streets. Wait till an end-of-world crisis is in full swing and high yield spreads are trading at 30%. Then buy.

      A crisis is coming. Be in cash / real assets right now.

      • But isn’t there a decent risk your 30% yield high-yield products are going to default a month later under those circumstances?