On 9 March 2020, the 10-year Commonwealth government bond yield was 0.555%.
When the Reserve Bank joined the Federal Reserve and other central banks to be the buyer of last resort (as well as the lender of last resort), the 10-year bond yield spiked to 1.632%, just 10 days later on 19 March 2020.
Today, the 10-year bond is 1.424% (up from 0.621% on 23 March 2020). Compare this with the Official Cash Rate of 0.10%, the Reserve Bank 3-year bond target of just 0.10%, and printing money to extinction.
The bond market, being the biggest bubble in human history, is bluntly telling the Reserve Bank (as well as other central banks) you are wrong, wrong, and wrong.
Will the Reserve Bank allow this? Would the Reserve Bank implement yield control on 10-year maturities?
HOW DOES THIS AFFECT YOUR MORTGAGE? It will most likely have little effect as the Reserve Bank has yield control measures from the overnight cash to the 3-year bond maturities, i.e., buy it all. UNLESS the credit markets freeze, like they did during the GFC.
When the 3-year bond yield (now at just 0.131%) and particularly the interest rate swap rate (now at 0.15%) head higher then be concerned.
It makes 4- and 5-year fixed home loan rates sub 2% available today, attractive.
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