Australian Dollar Australian interest rates

AUD alert: Aussie bond spreads crash negative to US

Tuesday 18 October 2022

Australian bond yields have once again crashed negative versus the US across the curve for the first time in two years:

Needless to say, this is intense pressure on the currency.

The bizarre shape of the Aussie curve continues as the RBA idiocy premium (that markets no longer trust the RBA’s outlook after it folded on YCC) refuses to contract, meaning long-end yields are far too high for economic prospects, leaving the curve too steep:

In truth, therefore, the Aussie yield spread to the US should be much deeper.

That is what is coming, in my view, along with an AUD with a 5-handle.

About the author

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.