Originally published by Rivkin Securities
US stocks continue to trade cautiously following the 25-basis point rate hike by the Federal Reserve yesterday. The Dow Jones closed virtually flat while the S&P 500 was up 0.25%. Long term US government bonds have been holding their ground despite the rate hike and the 10-year bond yield is still holding below 3.0%. Australian long-term bond yields declined quite substantially yesterday with the 10-year currently at 2.69%.
Australian bank bill swap rates are back up near multi-year highs despite no prospect of interest rate hikes here. The margin between the cash rate and three-month swap rate is now 56 basis points, indicating that funding costs for the banks are likely rising. Reserve Bank Governor Philip Lowe has said that an increase in rates looks to still be some time away.
Yesterday Australia’s employment data was released which showed a lower headline gain in employment of 12,000 verses 18,000 expected. Under the surface things were worse, however, as the gains came from an increase in part-time jobs which offset a loss in full-time jobs. Furthermore, the labour force participation rate (those working or actively looking for work) declined by 0.1%. Although the unemployment rate came in 0.2% lower than the prior month at 5.4%, some of this was due to the decline in participation rate.
Data Releases:
- Japan Interest Rate Decision 12:00pm AEST (estimated)
- US Industrial Production 11:15pm AEST