Bond market gives up on Aussie recession, not US

There’s been a decent bear steepening in the Aussie bond curve last month. This has priced out the likelihood of an outright Aussie recession as the inverted 2-10 curve has normalised. That said, the inverted 1-5 curve is a great indicator of per capita recession, and it is still telling us more to come:

The Aussie curve has decoupled from the US, oddly, given the travails in China. The deeply inverted US curve is still very recessionary:

Then again, when you’re running 4-5% population growth you’d have to drop a nuclear bomb on Sydney to get a recession.

Spreads favour more pressure on AUD ahead:

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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.