International Bonds Weekly : The Kangaroo Report

Lower yields, stronger currency and not many new bonds to sell.

aud-update

Moody’s came out with some robust growth headlines for the country that is accompanied by warnings of a potential housing market correction. http://online.wsj.com/articles/moodys-warns-on-australia-house-prices-1403769119

Nothing to deter bonds from rallying along with the US treasuries and the currency to strengthen into month end 1.8% stronger against the USD.

Year to date, interest rates and bond yields have been hammered much lower.

AUD YIELD CURVE

Whilst AUD 10 year government yields are still about 3 times what German bunds are fetching, Australia has one of the highest rates in the developed world after New Zealand and Greece, in the larger scheme of things.

The fact that Australian yields are now marginally higher than Portugal is a clear sign of its investment potential.

10Y BOND RATES GLOBAL

The currency strength cannot be more than an anomaly anymore than the yield and carry trade story as we head into the Reserve Bank of Australia meeting next Tuesday where they are expected and can only be expected to be hostage (unlike the UK) to an unchanged policy.

Yet the market position could work against the Australia story as AUD dollar longs are at a year high according to CFTC positioning data.

AUD CFTC DATA

The muted currency despite market pressures suggests a correction lying ahead for both bonds and currency.

Leaving you with some Kangaroo bond prices (unverified).

aud bonds