Bond rates are jumping quite quickly at the moment. Only a few months ago, the Australian 10-year bond rate was at 1 per cent.
We're expecting it to get to 1.9 per cent by the end of the year – and it's moving quickly in that direction.
Does that mean that the Reserve Bank is going to be raising interest rates now?
The answer is no.
Bond rates are reflecting long term inflation risks and the long term growth recovery that we're going to see around the world, whereas the RBA is looking at inflation and wages growth as it is today. And that, of course, is very, very weak.
So, we still believe that the RBA will keep rates on hold for three years or so.
That's very important because we've also released an important report on the outlook for housing.
While the RBA keeps interest rates as low as they are at the moment, that means mortgage rates hold at record lows. We expect that to continue for the next couple of years.
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