Nov 17

Australian Government Bond Yield Curve – Nov 2010

Not surprisingly since August 31 interest rates have increased across the board on the back of stronger local economic data (good unemployment, strong China etc) and now the yield curve has rates above those back at the end of May 2010.

It will be interesting to see what happend to interest rates over the coming days/weeks given the latest round of Euro-Sovereign crisis issues have started impacting the risk trade. My guess is that equities markets will be taking a break for a little while and there will be movement back to cash and bonds which should see the yield curve flatten a touch.

It certainly is a very tough investment environment at the moment…shares are loaded with all sorts of risk from the current Euro Sovereign crisis, to the sluggish global economy, to the potential over-reliance on China to perform. Bond prices are high (or yields are low) and property markets still appear fragile. As for commodities…there are good arguments for downside just as much as the upside story so a high risk story with limited expected return. If we’re looking for some decent returns I guess its time to get a little creative as the market (whatever market that may be) has a low return expectation accompanied by some higher than usual risk.

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