Australian Government Debt Moving in Tandem with U.S. Securities

Investors betting against Australian bonds are taking heart as the market listens as much to the U.S. Federal Reserve’s Janet Yellen as it does to local central bank chief Glenn Stevens.

Government debt due in 10 years and longer is moving in tandem with U.S. securities by the most since April. The correlation reached 0.926 at the end of last week, with a figure of 1 meaning they move in lockstep, according to an index compiled by Bloomberg and the European Federation of Financial Analysts Societies. The average is 0.797 over the past decade.

Stevens said last week the economy needs confidence rather than lower interest rates to stimulate growth, signaling Reserve Bank of Australia policy will probably remain unchanged. That leaves investors in the Australian market looking for guidance from the U.S., where Yellen said in Jackson Hole, Wyoming, on Aug. 22 that, with labor markets healing, Fed officials are shifting to debating when to reduce monetary stimulus.

Bloomberg

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