Here’s one of those notable developments that’s probably flying under your radar.
We’ve talked a ton about the aussie over the past several months and we really sharpened the focus last month when traders and a bunch of headline-scanning algos read the July RBA minutes and sent the currency soaring to a two-year high.
That set in motion a truly hilarious attempt by policymakers to jawbone it back lower and by the time the next RBA meeting rolled around, there was a kind of surreal dynamic in place where policymakers were using one meeting to talk back the market’s mistaken interpretation of an account of what they said at the last meeting.
Well anyway, following some data on 2Q construction and July building approvals (both of which beat economist estimates) 10Y yields are rising in Australia and given what we’ve seen recently in Treasury yields it will probably come as no surprise to you that the Aussie-U.S. 10Y yield spread is now at its highest since America elected Pennywise, the orange-faced nationalist clown:
Note that this spread was just 14bps in May. It’s 54 now.
Again, something to keep in the back of your mind as you ponder the evolution of relative central bank expectations.