This week brings the key November US non farm payrolls report. Market expectations are for a strong increase in employment (~175,000), an acceleration in wage growth (2.9%) and lower unemployment (4.8%). If the data meets (or exceeds) expectations, we would expect the interest rate futures market to increase the probability of further rate hikes in 2017 which would lead to a further steepening of the US yield curve. The other focus this week will be on oil and more specifically the decision on production levels coming from OPEC’s annual meeting. The market is expecting a supply reduction of at least 1 million barrels a day. These factors are significant in the context of international inflation expectations which is what is driving the selloff in the Australian Bonds. The steepness of the yield curve has increased significantly over the past 5 weeks and we are now approaching the recent peak (as measured by 10Y Interest Rate Futures Yield less 3Y Interest Rate Futures Yield). On the 25th of November 2016, the ASX 30 Day Interbank Cash Rate Futures November 2016 contract was trading at 98.505 indicating a 2% expectation of an interest rate decrease to 1.25% at the next RBA Board meeting (down from 5% last week).