Australian yield curve flattest since October 2010

  • Australia's bond market curve is flattest in nearly nine years.
  • The spread between the 10- and two-year yields has narrowed by more than 15 basis points this month.

Australia's bond market yield curve has hit its flattest level in nearly nine years this month.

The spread between the 10-year and two-year yields currently stands at 18.5 basis points, having hit a low of 13.4 basis points on Aug. 13. That was the lowest level since October 2018.

The narrowing or flattening of the yield curve could be associated with heightened recession fears in the domestic and global economy.

The US yield curve inverted earlier this month with the 10-year yield falling below the two-year yield. Curve inversions are known to precede recessions in the US.

This time, however, it may be different, as the US bond market is distorted by overseas developments, according to Mohamed El-Erian, Economist at Allianz.

Also, some observers, including UBS global head of rates strategy, Matthew Johnson, do not foresee a curve inversion in Australia.



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