Aussie 10-year bond yields hit 61-year low

Yields on Australian 10-year bonds have fallen to the lowest levels since the early 1950s.

This week, Aussie 10-year government bond yields hit 3.648 per cent – the lowest yield since June 1951 when yields averaged 3.51 per cent, according to Reserve Bank data. Australian 3 year bonds also ease. Yields on 3-year bonds hit 3.015 per cent – lowest since December 19 last year.
 
What does it all mean?
The plunge in the Australian ‘long bond’ rate to 61-year lows caps a red letter day. Not only has deflation returned to Australia (0.2 per cent fall in seasonally adjusted consumer price index) but government bond yields are now close to the levels trading in the early 1950s.

The two are clearly inter-related. Bond yields have fallen in response to the drying up of price pressures. But it is also a case that Australian government bonds are in demand from investors across the globe, worried about economies in the Northern Hemisphere. If Netherlands does lose its AAA status as some analysts speculate then demand for Australian government debt is likely to be boosted.

The low level of government bond yields represents good news for the Government, serving to keep downward pressure on borrowing costs.

If government bond yields continue to ease, this means further downward pressure on fixed lending rates, representing good news for business and home loan borrowers alike.