RBA stupidity premium delivers sovereign debt shock

Tuesday 12 July 2022

It has been one of the strangest episodes in recent Australian interest rate history. Why have Aussie spreads been so wide versus other nations despite lower inflation and much higher interest rate sensitivity?

It could be an RBA stupidity premium:

Bond investors are demanding a premium to hold Australia’s sovereign debt after being burned by the central bank’s failure to provide reliable guidance on inflation and interest rates.

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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.