The nation’s bond curve will flatten more, Goldman Sachs Group Inc. strategists including Praveen Korapaty wrote in a note. “The RBA may eventually be drawn into a cutting cycle should data deteriorate from here,” they said. “Relative to current pricing we think risk-reward favors curve flatteners.”
Emerging Stress
The flight to safety is spurring sell-offs in some parts of emerging Asia. Yields on Indonesian debt due in 10 years climbed six basis points to 7.67 percent as investors ditch high-beta assets.
The inverted yield curve in the world’s biggest bond market is sending a negative signal for developing-nation assets, according to Win Thin, global head of currency strategy at Brown Brothers Harriman & Co. in New York.
“If sustained, it would signal a likely U.S. recession in the next six to 24 months,” he said. “This is hardly conducive to risk and EM assets, which we see remaining under pressure this week.”
This article was provided by Bloomberg News.