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.
“The market’s confidence in the Reserve Bank of Australia’s messaging has definitely taken a hit,” said Prashant Newnaha, a Singapore-based rates strategist at TD Securities. “Significant losses from market participants and lack of credibility in guidance have led investors to make a conscious decision to move to the sidelines.”
The lack of trust from investors is reflected in Australia’s 10-year bonds, which last month saw yields spike to 92 basis points above similar-dated Treasuries last month, the widest gap since January 2015.
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Source: FinancialReview - 🏆 2. / 90 Read more »