Bond traders are active this morning after US 10 year bonds yields hit their highest point since March last year. Overall sentiment remains positive towards growth, and energy, metal and stock markets rallied on Friday night. Asia Pacific markets are set for opening gains, although volumes may once again reflect holiday restricted trading conditions.
While share markets have blithely accepted soothing voices on potentially higher interest rates, bond traders are preparing for a major change from central banks this year. This morning, New Zealand ten-year bonds are 4 basis points higher, and Australian ten-years are more than 5 bips up.
Rising longer term interest rates and a steepening yield curves reflect expectations of improving economic growth and tighter monetary conditions. In contrast, fresh all-time highs for major stock indices suggest share investors are looking for a “lower forever” interest rate environment. These markets moves are contradictory. Global investors must decide which of these two markets is correctly anticipating the path of monetary policy over 2021.
Local investors turn towards Australian company reporting season as US reports wind down. JB HiFi’s 86% profit increase over the half-year is grabbing analysts’ attention this morning, although investors are more likely focussed on the similar lift in the dividend to $1.80 per share. Bulk rail goods carrier Aurizon saw profits fall 22%, although underlying earnings were steady. Others top report today include Beach Energy, Bendigo Bank and GPT.
Crypto markets continue remain strongly positive on the back of increasing institutional investor interest Stella Lumens is the latest star, lifting by 18% in Friday’s session. Bitcoin also set a new high juts below $49,000, and a test of the $50,000 mark could come at any time.