Nov 24

Australian Government Bond Yields…seriously low

Source: RBA

Just when you think the yield curve can’t get any lower, the last 8 days have taken another 10 to 15bps off. Sharemarkets have obviously dropped on the Euro-debacle and this yield curve demonstrates not only significant interest rate reductions in the months to come but a significantly slowing Australian eonomy thanks to the global pressures.

Futures markets are banking on 25bps drop in the RBA next month and another 50bps in February 2012. This doesn’t mean the yield curve will drop but either way, I am still happy to lock in my home loan for the next few years at a rate that is significantly below variable rates, but that’s enough about me.

Investment strategy-wise, loads of uncertainty is the norm and term deposits continue to pay a massive spread over government bonds. Our sharemarket carries a bit of risk amongst banks and resources so I’m sure if there’s any value its bound to be in other sectors.

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