Pfft…..higher for longer

I think interest rates fall and mean revert.

Specifically, I expect the Australian 10 year bond yield to pull back to the 3% mark in the coming 6-12 months.

It’s currently at 4.88%

Once upon a time, I heard many investors say that would take a 5% return “any day of the week”.

Empirically, the Australian 10 year bond yield has no business being extended this far above its 200 week moving average, especially when coupled with the quantum of the move from its recent depths.

You should find this analog in (many) other government bond yields.

Falling bond yields should ignite discussion that diminishing and continuing negative real interest rate returns makes a positive case for being long equities.

There is also a trap for those fixing their borrowing rates today, possibly at the wrong end of the pendulum frenzy,

while falling rates could put some zip back into those ‘unprofitable’ tech stock stories again?

October 30, 2023

by Rob Zdravevski

rob@karriasset.com.au