The bond market signals the cash rate increase cycle is finished, but amid a confused picture, economists warn central bankers may not bow to the market.
Fixed income traders and equity investors are scrambling to make sense of the most challenging macro setup in a generation as a global banking crisis and ongoing battle against runaway inflation muddies the picture over the future of interest rates.
Both bonds now yield well below the 3.6 per cent cash rate. Thirty-day interbank cash rate futures are pricing in a 93 per cent chance the RBA holds rates at its April board meeting.In the US benchmark two-year Treasury yields cratered 98 basis points over the past month from 4.99 per cent to 3.81 per cent, their steepest decline since Wall Street’s stockmarket crash of 1987.
An RBA rate pause in April is “not a foregone conclusion”, says Hogan, especially as Australian economicBond trading veteran and founder of the Australian Bond Exchange Markus Mueller says uncertainty about the direction of interest rates is as high as it’s been, and bond pricing reflects stress in the financial system.
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