Australian Bonds Rally Extends to Largest Weekly Gain in a Decade

Australian bond prices continued to rally Friday as yields continued to fall, following the path of US Treasuries. Weak economic data from Europe to the US added has added to growing recessionary fears. US Federal Reserve Chair Powell and US President Biden have both been talking recession rattling investors. Yields on the more rate-sensitive three-year benchmark have fallen as much as 46 basis points this week and are headed for the biggest weekly drop since August 2011.

The yield on 10-year Australian debt fell as much as 17 basis points to 3.67 per cent while that on three-year notes dropped 17 basis points to 3.18 per cent. The reversal on 10-year bond yields follows them rising to 4.26 per cent last week, the highest since January 2014, before tumbling as investors feared the pace of central bank interest rate increases would push economies into recession.

Australia’s bonds whipsaw has been fierce in June after the Reserve Bank of Australia raised interest rates for the second consecutive time last Tuesday to 0.75%. The move was higher than expected, the RBA board was expected to lift the official cash rate by at least a quarter of a percentage point and possibly by as much as 0.4 percentage points. This indicated the rate cycle has accelerated. This is the second-rate hike by the RBA since 2010. Governor Philip Lowe said policymakers would do what was necessary to bring inflation down.

Via a Sunburnt Country

From The TradersCommunity News Desk