Watch out for rising bond yields (Part 2)
In my blog dated 6 May 2015, I cautioned investors on the recent increase in ten year sovereign bond yields. Unsurprisingly interest rate sensitive and yield driven stocks have reacted negatively.
I took seven countries; the US, the UK, Germany, France, Italy, Japan and Australia, and noted their record low ten year sovereign bond yield was, on average, 0.99 per cent.
The sell-off to 1.53 per cent, on average, by 5 May has continued to 1.77 per cent. I would be less concerned if this 0.78 per cent retreat was accompanied by a stronger global economy, but I am just not sure if that is the case.
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Con Katsiouras
:
Thanks for the update David. At what point do we start to see soveign interest rate increases impacting interest rates on “main street” ie. is there a level where the RBA stops having influece over the cost of credit in Aus ?
David Buckland
:
Thanks Con,
I think that is beginning with a couple of the Banks either not passing on all the recent decreases in monetary policy (to 2.25% in February and 2.00% in May) and also cutting all discounting.