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Term Deposit Review – July 2019

July was another strong month for markets, with gains in all major indices driven by the building wave of accommodative monetary policy globally.  The ASX200 soared to an all-time high during intraday trading late in the month, posting a gain of 2.47% for the period, as lower interest rate expectations and record-low yields supported growth.  The positivity will be tested in the coming weeks following President Trump’s decision to impose additional tariffs on US$300 billion of Chinese imports, and a reporting season expected to mildly disappoint.  Meanwhile, the trade concerns, slowing economic growth and the global easing cycle combined to force Australian yields even lower.  The 10yr reached 1.085% following Trump’s announcement – a 122% decline since the beginning of the year.  With conditions expected to continue in the short- to medium-term and the market confident of further RBA rate reductions, it is possible yields have not finished their falls.

Figure 1. Term Deposit Spread Over Relevant BBSW: June 2019 v May 2019

Source: RBA, BondAdviser

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