Daily Flows & Insights – U.S. Long-term Bond Yields Sell Off

Daily Flows

  • There was minimal changes in the RBA announcement yesterday, which did not prompt any considerable movements in yield.
  • Overnight U.S. yields sold off at the longer end as the markets start to price in the ‘higher for longer narrative’.
  • Market participants should expect the domestic market to follow suit today.
  • Currently 5 year term deposits are being offered at 5.25%. This level could be elevated today in response to market rates.


U.S. Long-term Bond Yields Sell Off

  • Last night, the U.S. Job Openings and Labour Turnover Survey came in hotter than expected, with 9.61 Million job openings (market forecasted 8.8 Million).
  • Whilst this print does indicate a robust labor market, the last 3 months has seen a downward trend in openings.
  • It seems at a glance a balance in supply and demand in the labour market is making progress, however at a gradual pace.
  • Fed speaker Loretta Lester also added to market angst indicating a November rate hike is on the cards if the economy remained strong in September.
  • Both of these factors contributed to markets selling off in the longer dated U.S. yield curve as market participants recalibrate restrictive policy being instilled for longer.
  • The dissonance between the U.S. yield curve and Australian curve may encourage the RBA to tighten monetary policy further to alleviate downward pressure on the Australian dollar as it hits an 11-month low.
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Curve Team
Jack Pedersen