Yield Curve

As a result of the rate rise yesterday the yield curve curve has flattened pivoting around the two year part of the curve. Rates out to 1 year have gone up about 5 points as much of the 25 point rise in the cash rate was priced in. Yields for 3 to 5 year terms have gone down as the smart money realises that the RBA is committed to staying on top of inflation and that future rises have been priced in.

GDP figures are due out today with expectations of 0.8 or 0.9 for the qtr. This will still be below trend but expect further rises during the course of the year as the RBA brings rates to neutral.