With the shadow of the Royal Banking Commission still hanging heavily over the major banks, they don’t really want to give politicians another stick to beat them with but as UBS analyst Jonathan Mott told clients on Monday, “the spread between the bank bill swap rate and the overnight index swap rate was at its highest since the financial crisis. Put another way the “yield curve”, a line that plots fixed interest securities against the length of time they have to run to maturity has been flattening; a prime indicator that rates are on the rise raising big warnings on the economy

As we discussed in our earlier piece on Rising Borrowing Costs, the pressure is on all bank and non-bank lenders to start passing on higher borrowing costs while such moves would be quietly applauded by the Reserve Bank who; based on existing low wage growth and inflation; have their hands tied.

No one ever lost money by taking a position while trying to pick the bottom of the market in my opinion. Sure there may always be a slight correction, the A$ may lift, Trump may fall on his face when he visits Europe in the coming weeks and pigs may indeed fly if Elon Musk has any influence but having a bet each way at the moment seems logical to me; what do you think?

By Richard Aulsebrook