Flat to Positive Yield Curve

As you know, the RBA dropped the cash rate to 3.00% yesterday. The yield curve is now very flat to upward sloping. Rates for all maturities are a little higher than yesterday as the market had priced in the possibility that the RBA may move 50 points. The longer end of the yield curve (4 - 5 years) moved up around 15 points as they begin to price in the inevitable return of inflation and lifting of short term rates. It's unlikely that further easings will cause the longer end of the curve to drop down unless evidence suggests further deterioration in world growth thus delaying any recovery. A further steepening of the yield curve from here will indicate a stronger conviction that growth is returning. My feeling however is any steepening in the near term will be premature and may be an opportunity to lock in some good two and three year rates.