The Aussie bond curve is still warped

The RBA has driven yields down but dang is that curve warped:

That slope says massive recovery with inflation imminent! Not.

As the risk parity liquidaton eases I expect long end yields will fall along way. Indeed, for some enterprising hedgie with the firepower to do it, it is a singular arbitrage opportunity. There is no recovery or inflation coming.

Meanwhile, the same twisted shape has long end yields exhibiting a positive carry to the US, in theory putting upwards pressure on the AUD, though nobody cares today:

That shouldn’t last, either.

David Llewellyn-Smith
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