Did Australian interest rates just bottom?

Thursday 10 November 2016

US bonds took an absolute pounding last night as markets concluded that a Trump Administration will be inflationary. It sure will be if it cuts the corporate tax rate from 35% to 15%, deports 11 million cheap labour Mexicans and imposes a 45% tariff on China! Though I doubt that’s all going to actually happen, material tax cuts are a near certainty and that’s enough for starters. Hence US bonds sold across the curve:

But especially strongly at the long end so the curve steepened 16bps:

Downtrends are intact but the move is probably not over.

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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.