Candice Zachariahs - from the fin review 18.08.2014 Economists can’t keep pace with Australia’s biggest bond rally in three years, forcing them to slash yield forecasts even as they stand by calls for a selloff. Australia’s sovereign debt has returned 6.2 per cent since December 31, on pace for the best annual return since 2011, a Bloomberg index shows. The 10-year yield closed last week at 3.39 per cent, having dropped 85 basis points this year. Economists surveyed by Bloomberg News this month predicted the benchmark will increase to 3.85 per cent by December 31, cutting their median estimate from July’s 4.25 per cent, the biggest change in more than a year.
Investors are piling into Aussie bonds on bets the Reserve Bank of Australia will keep its interest rate at an all-time low, extending a pause to a record stretch, as US and European policy makers pledge to maintain accommodative measures.
