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Westpac: Real Yields Are Set To Push Nominal Yields Higher


Westpac note that over the last week “the move in real yields was larger than nominals, as BEIs across the term structure widened under fears of an energy led inflation surge. The shifts in the U.S. were higher, however they were substantial in Australia as well. We expect the move lower in real yields to slow and indeed reverse over coming weeks. Australia’s 10-Year real yield is around 15bp away from pushing into positive territory for the first time since well before the pandemic. With 10-Year BEIs in the lower half of the target band, there is unlikely to be a major re-pricing of inflation risks higher once the RBA begins its tightening cycle. So real yields will do the “heavy lifting” when it comes to our expectation that Australian 10-Year bond yields will reach 2.50% in 2022.”

MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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