Bonds describe endless Australian pain

US bonds have been getting a flogging. This is overdone is overdone in my book.

The Fed cut again last night and is on track for more. It will pause once Trump’s tariffs hit, but then resume in 2026.

The 10-year has priced enough:

The backup has been driven by robots which are almost done selling.

In Australia, all rate cuts are now priced out, which is pretty stupid given we are about to begin an easing cycle.

The imminent RBA easing (and US election) has begun to steepen the curve. However, the belly of the curve has not broken out of its per capita recession range.

The Chinese stimulus has rescued yield spreads for now. This won’t last in 2025, in my view, pressuring AUD.

Bonds are mispricing the RBA pivot.

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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.