Test / Interest rates look set be “lower for longer”

By Market Matters 05 June 19

Interest rates look set be “lower for longer”

At the June RBA meeting the Australian target cash rate was cut from 1.5% to 1.25% with forecasts of more to come with targets now coming in between 0.5% and 1%. This is clearly great news for homeowners with a mortgage but not for savers living off the interest while it paints a clear picture that our economic engine is not firing on all cylinders.

Hence moving forward companies with attractive sustainable yield should perform strongly in 2019 / 2020 e.g. CBA is paying 5.5% fully franked basis $78.42 while term deposits are paying well under 3% unfranked.

We feel interest rates will remain around current levels, to lower, for at least the next few years.

Australian 3-year bond yield v RBA Cash Rate Chart