Jun 07

Reserve Bank No Change…but some movement on the yield curve

Source: Bloomberg

As the above Australian Government Bond Yield curve chart shows, whilst the Reserve Bank left the cash rate unchanged, the shorter end of the yield curve decreased in yield by up to 5bps. This represented around a 1% increase in price of the Australian government bonds maturing within the next 5 years…quite a significant daily move. Bottom line…the Reserve Bank have effectively admitted that the Australian economy is a little softer than previous thought and the market has taken that on board and reduced the likelihood of another rate rise by buying up more bonds.

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