Yields once again proving to be a bane for the aussie

Author: Justin Low | Category: News

The aussie holds weaker as 10-year Australian bond yields fall under 2% for the first time since September 2016

AUD yields
Despite equities improving slightly in European trading so far, the aussie isn't getting any reprieve as it is fighting alongside the kiwi as the weakest performing major currency on the day.

The poor consumer confidence data earlier did more than just hurt sentiment as it also precipitated a fall in Australian bond yields, with 10-year yields falling below the 2% level for the first time since September 2016.

And that is enough to keep the aussie pressured on the day as the divergence continues to grow between Australian yields and US yields, in favour of the latter of course. The spread between 10-year Treasury yields and Australian bond yields now sit close to 66 bps in favour of Treasuries; that's the widest gap since the 1980's.

AUD yields 2
If you're wondering how drastic the gap has widened over the past year, it was only about 23 bps nine months ago. At the time, AUD/USD was trading just under the 0.7500 handle.

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