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Recent developments in Australian bond yields

Author

Listed:
  • Benjamin Ford

    (Treasury, Government of Australia)

  • Karen Taylor

    (Treasury, Government of Australia)

Abstract

The yield curve typically slopes upwards as bond investors require higher interest rates to hold bonds of longer maturities. For most of 2005, the Australian yield curve has been close to flat, or negatively sloped. The traditional interpretation of such a development is that the bond market expects lower future short-term interest rates and weaker future economic activity. However, this conclusion is at odds with the recent performance of the Australian economy and the outlook for 2005-06. The paper argues that a combination of domestic and international developments have suppressed long-term bond yields.

Suggested Citation

  • Benjamin Ford & Karen Taylor, 2005. "Recent developments in Australian bond yields," Economic Roundup, The Treasury, Australian Government, issue 4, pages 111-120, December.
    • Handle: RePEc:tsy:journl:journl_tsy_er_2005_4_3
    as

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    File URL: http://archive.treasury.gov.au/documents/1042/PDF/09_low_bond_yields.pdf
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    References listed on IDEAS

    as
    1. Arturo Estrella & Frederic S. Mishkin, 1998. "Predicting U.S. Recessions: Financial Variables As Leading Indicators," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 45-61, February.
    2. Moneta, Fabio, 2003. "Does the yield spread predict recessions in the euro area?," Working Paper Series 294, European Central Bank.
    3. Chay Fisher & Bruce Felmingham, 1998. "The Australian yield curve as a leading indicator of consumption growth," Applied Financial Economics, Taylor & Francis Journals, vol. 8(6), pages 627-635.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bond yields;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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