Blackrock: Aussie QE will send interest rates negative

See the latest Australian dollar analysis here:

Macro Afternoon

Via Bloomie, bring it on:

Prolonged equity losses and monetary easing by the Reserve Bank of Australia can send the nation’s 10-year bond yield into negative terrain for the first time, according to Craig Vardy, head of fixed income for Australia at the world’s biggest money manager.

…Quantitative easing may be implemented in the fourth quarter, said Vardy, who has been long 10-year Aussie government bonds and U.S. Treasuries since mid-February.

…“If it gets to the point where you have got serious concerns in the equity market in particular and risk assets, then what’s to stop bond yields getting negative here?” Sydney-based Vardy said. “Nothing.”

And on the AUD:

Sixty cents is in the target range for us, and then clearly if things escalate, it will be through 60 U.S. cents.

Vardy says buy the long end of the curve. I concur. QE will be earlier and the AUD lower as Australia shuts for the winter.

David Llewellyn-Smith
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