Aussie 10-year Govt bonds underwhelm versus US counterpart in wake of Russian invasion

Fri 04 Mar 22, 6:48pm (AEST)

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Key Points

  • In the wake of the mayhem playing out in Eastern Europe, Australian 10 year government bonds have failed to move as much as their US counterpart

Having declined rapidly since the Russia’s Ukraine invasion, the US 10-year government bond yield is down 10.5% from 25 February (1.969%) to close yesterday at 1.762%.

By comparison, Australian 10-year government bonds were down 4 basis points (bps) or 0.04% to 2.09%.

While Australian’s limited faith and understanding of bonds goes some way to explaining the discrepancy between the two rate moves, so too does the sheer size difference between these two markets.

For example, while there’s around US$22,893,924m in US public debt securities outstanding, by comparison the figure is AUD$1,475,868m of debt (as of 2 March 2022).

Softer landing

It also needs to be remembered that the Russia/Ukraine conflict started playing out during reporting season for listed Aussie stocks.

Given the predominance of resource stocks that collectively move the market, any commodity price increases, courtesy of sanctions on Russia, may have offset the broader impact on the index at large.

But while gold is up 3.8% since the war began (9% year to date), it’s oil and gas investors that have benefitted most from the war in the Ukraine. As a case in point, crude oil has risen 24% since the war began (25 February) and up a whopping 44.3% since the start of 2022.

However, what’s noteworthy is heightened volatility in the government bond market later in the week, with the Australian 10-year bond yield increasing 10 basis points yesterday, versus S&P/ASX 200 gains of 0.5%.

Meantime, traders are still pricing in four Reserve Bank cash rate hikes this year to lift the cash rate just above 1%. 


Source: Trading Economics

Written By

Mark Story


Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

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