Bonds: A big week ahead – ANZ

According to analysts at ANZ, the latest US GDP result showed that most sectors of demand are rising in a solid fashion and above-trend growth when the economy is operating at full employment should help push inflation higher and intuitively that would suggest higher bond yields.

Key Quotes

“Indeed, US 10-year yields have risen from a low of 2.04% in early September to 2.41% today. Some see the 2.4% level as a key one, which if sustainably broken, could see rates move significantly higher (indeed, according to Bill Gross earlier this month, it would signal the end of the 30-year bond rally!). Whatever your view, there are a number of hurdles this week that could see US rates – and by association, New Zealand rates – pushed around significantly. The Fed Chair nomination is a key one – rightly or wrongly, Taylor is seen as a hawk, Powell a dove. There’s an FOMC decision – no hike is expected but December signalling will be key. A tax reform bill is due, Treasury funding data is out, and non-farm payrolls and PCE inflation to boot.”