Strategy radar_2012_1123 > What’s with the inverted Government Bond Yield Curve?

This week was marked by quite a few news coming from the IMF and other international governing bodies as part of the review of the stability of Australia’s financial system (always a dense but good read from the IMF: http://www.imf.org/external/pubs/ft/scr/2012/cr12308.pdf ). Following the Global Systemically Important Financial Institutions (GSIFIs) (the famous global ‘too-big-to-fail’) the IMF is now looking at the Domestic Systemically Important Banks (DSIBs). The IMF is also starting to target ‘Shadow Banking’ (which includes the $4.5B debenture sector). The IMF also caused angst with a bit of a ‘poisoned gift’: the plan to reclassify the AUD as a ‘reserve currency’. A ‘prestigious’ title but that could push our currency even higher, which our economy doesn’t really need at the moment…
In the non-finance world a consortium of 200 Australian retailers organised a 24-hour online ‘super sale’ (online version of Boxing Day Sales): the site crashed due to the number of visitors, proving 2 things: there is demand, and it’s not being met adequately.

On the macro front, the argument between those predicting a weakening of Australia’s economic future and their opposites continued via the release of the RBA minutes for November and Michael Chaney’s declarations on our “growth cliff”.
The snapshot this week is to drill into a very interesting topic flagged by the media: the inverted Australian Government Bond yield curve. It is currently looking like a “Nike Swoosh” – what does it mean and what’s behind it? So let’s “just research it”…

As per usual, main sources (and other recommended data points) are curated in Pearltrees: http://pear.ly/bOPpz

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