Australian Rate Cut due to Weak Jobs and High Aussie Dollar: Goldman Sachs
Published By : 22 Oct 2014 | Published By : QYRESEARCH
The Asia-Pacific head of fixed income at Goldman Sachs Asset Management, Philip Moffitt, has underscored the divide between the bond market and economists. He has re-asserted his earlier notion that the Reserve Bank of Australia might be compelled to slash interest rates, despite the tightening U.S. Federal Reserve.
The region’s senior most fixed income expert said that his forecast to make breathing room from the RBA was just an outlier as it was presented at odds with the economists’ consensus.
Most economists believe that the RBA might raise rates in 2015. But traders are weighing in a roughly 40 percent chance of a cut in 12 months.
Philip Moffitt said that the method they with which they will analyze the growing concern over asset prices is that that although the costs are rising, it is not creating a leverage bubble. He added that it would be true that the rates are low from a domestic point of view. However, benchmarking this against the rest of the world reveals that Australia still has high interest rates.
He also said that the demand for Australian asses, especially fixed income assets for foreigners is extremely strong. He cited an example of buying from Japanese investors. He said that according to global standards, Australia is a high quality and high yielding area. If a citizen is getting zero or negative in Europe, they are actually paying the bank to hold their money. He added that three percent on Australian sovereign or even 3.5 to four percent on a semi-government bond is quite attractive.