Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 6 April 2017

Trump trade runs out of legs

Trump trade

It's been a strange year or so to say the least.

Donald Trump winning the US election was apparently going to send Australian interest rates higher on a joyful wave of tax cuts, infrastructure building, and a few nifty slogans.

A temporary triumph of optimism over common sense, perhaps.

Australia's 10-year bond yield had raced all the way from 2.17 per cent to 2.98 per cent by the middle of last month!

But it seems that markets are now finally having a change of heart with the 10-year yield sinking all the way back down to 2.56 per cent earlier today.

The 2-year bond yield has dropped from 1.91 per cent on March 10 to just 1.66 per cent.

Which makes a lot more sense to me.

The Reserve Bank's own Chart Packs yesterday showed that inflation is still missing target on the downside and business investment remains in a multi-year decline as resources investment continues to fade. 

If the Reserve Bank hikes into that then they might as well tear up the inflation target mandate entirely!