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May 03

Australian Government Bond Yield Curve

With last week’s high CPI figures coming out there has been increased talk about the Reserve Bank increasing interest rates. The above yield curve chart shows that since 12 April, the yields on government bonds have actually decreased across the board by around 20bps suggesting less long term confidence in our economy than two weeks ago. As has been commented on, the CPI figures were high largely (not totally) because of the high Food and Energy prices…keep in mind the Reserve Bank’s actions will have virtually zero impact on Food and Energy prices as they are high because of a combination of natural disasters, middle east conflict, and a bit of proprietary trading by those nasty US investment banks.

With home prices starting to fall (I did say that residential property would peak when my partner and I purchased a property back in February), the Australian dollar killing our tourism and foreign investment, and underlying inflation (excluding volatile items) actually near 10year lows, whilst our economy is still looking well, as the yield curve movement suggests our economy is not as rosy as the papers and fund managers make us believe and controllable inflation is under control.

Hopefully no interest rate rise today!

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