The decline in bond yields in Australia and New Zealand throughout 2019 has paused in recent months following optimism about a potential trade deal between the US and China and hawkish language from the Fed. But we think that bond yields in both countries will resume their decline in 2020. We think that rising unemployment, sluggish growth and easing inflation will force the RBA to cut rates to 0.25% by the middle of next year. What's more, we expect the RBA to cross the Rubicon and launch quantitative easing in 2020 adding to downward pressure on bond yields. In New Zealand, we expect weak GDP growth and a deteriorating labour market to prompt the RBNZ to cut rates twice next year, more than investors currently anticipate. The upshot is that we expect yields to decline further in Australia and New Zealand despite our expectation of a rise in US yields in 2020.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services