This is not a crypto coin, it is not a SPAC, it is not a meme stock. It is the chart of the Australian 2 yr government bond yield. pic.twitter.com/unAN6QLgeU
— Peter Boockvar (@pboockvar) October 29, 2021
— spaceMonster🌌👾 (@spcMnstr) October 28, 2021
Heading into the Thursday session, markets were expecting the RBA to buy the April 2024 bond in order to contain the recent blow out in yields, which had moved far beyond the central bank’s official 0.1% objective in the past day. However, the central bank shocked traders when it decided against buying any of the target bond.
Not only will the move fuel expectations for Governor Lowe to entertain the idea of an earlier rate hike, but it will reprice the entire short-end of the Australian yield curve, which will soon pancake in preparation for the coming inversion, which in turn will lead to shockwaves that will be felt in Europe and the US as soon as tomorrow, pouring even more fuel on the recent short-end fire that today sent the US 2Y above 50bps , and was at 0.52% at last check moments ago.
“To a central bank which is guiding rates unchanged until 2024 and targeting the April 2024 bond at 10 bps, it must be like watching a horror movie.”
Offshore events added to the drama with the Bank of Canada stunning markets on Wednesday by ending its bond buying altogether and flagging a hike as soon as April.
h/t Doorbert Returns