Australian bonds are cheap

Monday 20 April 2015

After several weeks of curve steepening, the Australian bond curve is once again flattening, broadly thought to be indicative of weakening growth. Short and long yields have been rising but the short end more so as doubts grow around a May rate cut:

The to 2/5 year slope is now just 11bps, only 2 points from its shallowest in three years. The 2/10 slope remains in a normal range:

If the RBA doesn’t cut in May then the 2/5 may well invert even if the longer curve remains flat.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.