Budget blowout
The mother of all Budget blowouts was confirmed by Treasury today, with a record expected deficit of $185 billion for 2021.
The unemployment rate is expected to peak at around 9.25 per cent this year, before steadily recovering in 2021.
Just in case anyone still believes that debt and deficits necessarily lead to higher yields, the UK public debt exceeded 100 per cent of GDP this year for the first time since 1963, yet the 5-year gilt actually turned negative in May for the first time ever.
Britain's government sold its first bond with negative yields at auction.
Why wouldn't the UK government borrow like crazy and build infrastructure (or even bridges to nowhere) when they've been able borrow at negative interest rates?
This paradigm is challenging much of what was previously thought to be understood about economics.
Still, it's supply and demand as they say.
Australia borrowed for a decade at 0.83 per cent today, with a single investor hoovering up the full line.
Source: Austrlaian Treasury
In other news, there's been a rapid shift to deflation this year.
There are plenty of one-offs to account for, but it's still very weak momentum, with Westpac's Justin Smirk explaining a significantly negative result in Q2.
Source: Justin Smirk, Westpac
Yet another inflation target miss...will the RBA drop the 3-year target yield down to 0.10 per cent?
