The major market indices experienced a strong month through June, benefiting from positive geopolitical developments and an increasingly dovish rate outlook from central banks around the world. The ASX200 reported a robust gain of 3.47%, surging late in the month on the back of President Trump’s announcement that the US will restart negotiations with China. Meanwhile, Australian treasuries broke new records as yields plummeted in response to the firming of dovish rate outlooks from the ECB, FED, and RBA.  The 3yr closed the month at 0.96% whilst the 10yr reached 1.32%.  The RBA satisfied market expectations when it cut the cash rate to 1.00% in the first week of July, signalling the possibility for further rate reductions if the current rate is incapable of sparking the economic activity required to boost wage growth and return inflation to within the Bank’s lower bound.  

Figure 1. Term Deposit Spread Over Relevant BBSW: June 2019 v May 2019

Source: RBA, BondAdviser

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