Japan analyst says Australian bond yields to fall to US levels … “It’s a deflationary situation”

Hideo Shimomura, Mitsubishi UFJ Asset Management Co.’s chief fund investor says Aussie government bond yields will fall to 3% by the end of October, reducing his forecast from 3.25%

• Says a sluggish economy increases the odds the Reserve Bank will reduce interest rates
• “Growth isn’t keeping up. Incomes are decreasing. It’s a deflationary situation. They may have to cut rates.”
• Mitsubishi UFJ Asset joins economists at Goldman Sachs Group Inc. in predicting a lower benchmark at a time when the consensus estimate is for no change this year

More at Bloomberg.

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Inflation is running at the upper end of the RBA target band. Not deflation. Can’t see the RBA cutting by October, but there ya go.