Westpac: Bonds Are In A Consolidation Phase

Westpac note that "the Australian bond market has been consolidating after the recent re-pricing of the growth and inflation outlooks. It has now reached a level where valuations are more in line with RBA risk rewards and historical steepness. So for now, until the data outcomes shift pricing in either direction, we are likely to also observe range-trading conditions. We have looked back at the major bear markets since the RBA began inflation-targeting in the mid-90s. The message is that other bear markets have been sharper to begin with (although perhaps not in percentage of starting yield terms), and all but one has lasted longer. Also, 10-Year yields have risen further than the current cycle which began in July last year. Corrections are rarely greater than 20bps at this stage of the cycle."