Bonds/Interest Rates

Wall Street traded down last night largely because there was no reason to trade up. Dow down 79.

Commonwealth Bank is aggressively forecasting the Reserve Bank of New Zealand cuts official rates by 1.0% this week.

TD Securities have gone on record, predicting three 25bp rate cuts in the next three months as the view on the Australian economy darkens.

With no Chinese stimulus package forthcoming, Wall Street went back into fear mode last night. Dow down 280.

A few home truths.

Further policy measures are expected in Australia but brokers see growth risks remaining to the downside in coming months.

While the RBA surprised by not cutting, few were taken aback, with the FNArena Snap Shot consensus still calling for an official cash rate of 2.3% by some time this year.

Some positive hints from China provided Wall Street with a long-awaited bounce as commodities soared. Dow up 150.

Australian GDP for the December quarter contracted by 0.5%, potentially prompting further stimulus measures in coming months.

Westpac economist Bill Evans has been talking to Americans about both our markets.