Weekly Market Recap
Week in review
- Australia business confidence slips 3.7pts to 19.8
- Australia consumer confidence dips 5.9pts to 107.2
- U.S. CPI inflation jumps to 5.0% y/y
- U.S. Federal Reserve policy meeting
- RBA minutes of monetary policy meeting
- Australia labour market report
Thought of the week
Somewhat against the consensus view bond markets have been rallying and yields falling. If anything the concerns around inflation, the impact of supply-chain bottle necks and rising labour costs, should put upward pressure on bond yields. It may be that the consistent messaging from central banks around inflation pressures being transitory are starting to sink in. Alternatively, it maybe that some of the disappointing economic data on the U.S. labour market has tempered views on the risk around a policy error if the labour market is tightening faster than thought. Certainly the ‘million jobs’ a month view in the U.S. has not transpired. This week’s chart shows the relationship between economic surprise and government bond yields in the U.S. The relationship is not perfect and yields can be moved by other forces, but it does suggest that some of the misses on economic data is having an effect. Given the strength of global economy is would be hard for yields to remain this low.
Lower yields on lack of surprise
U.S. Treasury yields and economic surprise
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