Following the FED’s decision today, the benchmark T30 US Bond yield continues to move higher. A strong indicator that capital markets rates will continue to rise. The FED is signalling more hikes next year, so yields will continue to climb. This has global significance.
The knock on effect for Australia is significant. Banks will have to pay more for their capital markets funding. International money market investors will switch money from Australia in favour of US markets, putting downward pressure on the AU$. This makes an RBA rate cut in 2017 even more remote (though some economists are still talking about 2 cuts!).
Mortgage rates here will continue to rise. Our outlook on the Property Market for 2017 took these rate movements into account.
Further evidence the world changed last month.
