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May 06

Increase in Government Bond Yields Today

Contrary to suggestions in my last post, yields across the yield curve have moved a bit today…as the above chart shows the curve is up between 5bp and 9bps. This is a result of the Reserve Bank increasing its inflation outlook over the next 2 years. The Reserve Bank believes inflation will be above its target range due to increases in the costs of fruit and vegetables thanks to the Queensland floods as well as wage inflation caused from the mining sector. It also expects unemploymet to fall to 4.25%.

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