Oliver's Insights
Oliver's Insights is special commentary by Dr Shane Oliver, Chief Economist and Head of Investment Strategy, on issues and trends affecting the economy and financial markets.
Oliver's Insights
Are bonds in a bubble?
3 February 2012
- Australian and international bonds were the best performing asset classes last year as sovereign bond yields in Australia and major global countries fell to record or generational lows.
- Bond yields are low because of low growth, low inflation, low short-term interest rates, central bank bond buying in the US and elsewhere, and safe haven demand. Since there are good fundamental explanations for low bond yields this would suggest that bonds are not in a bubble.
- However, the scope for further sharp falls in yields is limited. Bonds are also poor value with yields running well below long term sustainable levels. Unless there is a return to global crisis and/or recession, this all suggests subpar returns from sovereign bonds on a medium term basis, specifically over the next 3-5 years.
View Are bonds in a bubble? (PDF - 85 Kb)
The global economy looking a little less scary
25 January 2012
- The last month or so has actually seen better news regarding the global economy - European Central Bank action appears to have reduced the risk of a banking crisis in Europe, US economic data has continued to surprise on the upside and Chinese economic data remains consistent with a soft landing.
- Downwards revisions to World Bank and International Monetary Fund forecasts and associated risks are just catching up to the market concerns of three or four months ago.
- While shares are at risk of a short-term correction and Europe remains a source of volatility, the improved global economic backdrop is a positive sign for shares and related growth trades going forward.
View The global economy looking a little less scary (PDF - 489 Kb)
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