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Bond yields expected to boost locally listed properties

Finance Markets / Latest Activity


Apr 15 2018

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The recent contraction in bond yields could boost relative performance for locally listed properties, according to figures released by Citi, whose research concluded that the yield curve for Australian bonds is flattening again. 

Analysts David Lloyd, Adrian Dark and Suraj Nebhani said the Australian 10-year bond yield had contracted around 30 basis points since its recent high of around 2.6 per cent in early February. 

But they said the 10-year bond yield is contracting faster than the 3-year bond yield, creating a Bull Flattening yield environment..

The analysts identified three major flattening periods over the past five years, the listed real estate trusts outperformed the broader index by around 25 per cent in two of those periods. 

"The yield curve also flattened during 2017, but this was driven by short end yields rising with the long end declining, resulting in a Bear Flattening environment," they analysts wrote.

The Citi analysis also described what they called a "bear steepening" period, when the bond yield curve widens due to the long end rising faster than the short end.

Photo by Sam Wermut on Unsplash




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