Australian bond yields have spent 2019 falling – in tune at most times with what is happening offshore.
The two rate cuts from the Reserve Bank and the very accommodating money policy stance has played a big role as well, as has aggressive buying from investors looking for high-quality AAA-rated bonds paying a positive yield, like Australia’s.
Australian yields across the board have fallen to a succession of new lows this year and Tuesday was no different.
The RBA statement and their at times dovish tone saw the yield on the 10-year bond yield dip to another all-time low of 1.04%.
Australia Government Bond 10Y
The yield curve in Australia is now obviously inverted – that is the short term rate – the cash rate of 1% is higher than the 2-year yield 0.75% and the 5-year yield, 0.72%.
Some economists reckon that can be a warning of a looming recession, but others caution that it could also be a sign of strong buying interest from investors looking for a positive yield, no matter how small.
The low yield in Australia is far more attractive than the negative on bonds in the EU and Japan and Switzerland for example where investors are effectively paying governments to own their bonds.