Quick Bites | Jobs weaken and bonds rally

Jobs weakness see bond yields fall.


Australia’s economy unexpectedly shed 14,600 jobs in December, suggesting that rate rises by the RBA are starting to have an impact. The unemployment rate was unchanged from November’s 48 year low of 3.5%, but economists had expected the addition of about 25,000 jobs.


The participation rate fell to 66.6% on a seasonally adjusted basis from November’s record-equaling 66.8%. The surprise loosening of a historically tight labour market could ease pressure on the Reserve Bank of Australia (RBA) to raise the cash rate at its February meeting.


The yield on Australian 10-year government bonds fell sharply in the aftermath, indicating that traders were reducing expectations for rate rises (a strong rally in US Treasuries also helped.) RBA’s Philip Lowe said last month that the central bank expected to further raise rates in 2023 in its efforts to bring down inflation. The RBA has announced 3.0% of policy tightening since May. Raising the cash rate by 25 basis points to 3.10% on 6 Dec, the RBA said that it expected annual inflation to peak at about 8% before moderating over 2023.


Aust 10 year Govt Bond – 1 month

 Source: Trading Economics


Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770.  The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.