Global risks are rising, threatening to overwhelm RBA's rate move
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In the US, the yield curve has inverted, with short-term rates higher than long-term rates. Investors are prepared to accept a lower yield (2.26 per cent) for bonds that won’t mature for a decade than they are for bonds maturing in three months (2.35 per cent).
Every US recession has been preceded by an inversion of the yield curve, although not every inversion has been followed by a recession. What the US bond market is signalling, however, is lower rates in future because of an expectation that the rate of growth in the US economy will slow.
In Europe, German bunds are trading at negative yields, with the 10-year bund yielding minus 0.181 per cent. In Japan the 10-year rate is minus 0.10 per cent.
Stock markets are also retreating. The US market, while still at historically high levels, has fallen about 5.5 per cent this month. Europe’s Stoxx index is down more than 6 per cent. The UK’s FTSE 100 is down 3.4 per cent.
Our market has so far defied the trend, helped by the surge in iron ore prices after the latest Brazilian dam disaster, something of a relief rally in the major bank stocks and the re-election of the Morrison government, and has held its ground this month.
Article source: https://www.watoday.com.au/entertainment/tv-and-radio/m13tvmon-20181003-h166p0.html?ref=rss&utm_medium=rss&utm_source=rss_feed
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