The Australian dollar is heading for a retest of 70 cents:
As yields decouple for the US:
XJO has again shrugged off a weak Wall St lead and has spent the last week decoupling:
It’s not Big Iron:
Nor Big Gas:
Nor Big Gold:
It is Big Banks that are doing it:
As they decouple from US financials:
This is odd given the US is seeing a steepening yield curve and Australia a flattening one. That would normally mean the reverse as US banks rose and locals floundered.
The inversion is the expression of the New RBA and its forthcoming “Operation Twist”. The shift towards QE for public and private bonds will eventually destroy bank margins but, for now, the market seems happy to buy the ever declining yield because it is so much better than the alternative.
In short, Aussie banks are now trading as high yield junk bonds.
Get some if you dare!
