Last week was once more characterised by risk on for Australian and global equity investors. In the US, the Dow Jones Index and S&P500 reached all-time highs of 18,595.03 and 2175.03 respectively whilst locally the S&P/ASX200 Index returned 1.26% over the week after reaching a 12 month high of 5,512.397 points on Thursday.   Despite the rally in equities, the generic 10-Year Australian Government Bond Yield ended the week 0.065% lower at 1.92% which is not really a surprise given the lower for longer interest rate dynamics.   Although a fairly quiet week in respect to Australian company news, there were some interesting insights in regards to monetary policy:   – Last week saw the release of the July RBA Board minutes with this week’s inflation update being highlighted as an important consideration to any future adjustment in the cash rate (see interest rate section below). According to the release, the RBA remains more upbeat regarding Australia’s investment and growth outlook, with the transition to other growth sources described as “well advanced”.   – Overseas, the European Central Bank (ECB) left rates unchanged last week but hinted, like the Bank of England (BoE), at more monetary policy easing over the coming months.   – Across the Tasman, the Reserve Bank of New Zealand (RBNZ) gave a reasonably clear indication that a rate cut is coming.   – The Bank of Japan (BoJ) are also expected to announce more monetary policy easing to the aim of weakening their currency.   – The US Fed Reserve will meet on Wednesday and are expected to keep US rates on hold but indicate that a rate rise later this year is still being considered (albeit market expectations are split).   Overall, this reflects the fragile state of the global economy and as a result, policymakers remain cautious. While diverging monetary policy between the US and the rest of the world was expected over 2016, the ramifications of Brexit revealed the world remains delicate post the Global Financial Crisis. It is therefore no surprise that the US have now revised their actions and re-joined their western counterparts in the lower for longer interest rate movement. As a result, we can expect yields to remain subdued as investors continue their search for yield.   Click below for Interactive Charts Chart 1: Bloomberg AUSBond Composite Index (Monthly) Chart 2: Bonds vs Equities 2015/2016 (Monthly)