STOCKS | Commonwealth Bank Says Softer U.S. CPI or Fed Hike May Be Only Brake on Bond Selloff

Commonwealth Bank of Australia said softer U.S. inflation data or a Federal Reserve rate hike may be the only brake on a global bond selloff. According to Sina Finance, Sydney-based rates strategist Michael Tang said the move reflects broad hawkish sentiment, citing surging oil prices, disappointing U.S. buybacks, and U.S. President Donald Trump’s talk of a $5,000 dividend that he said is highly unlikely to be implemented. Tang said softer U.S. CPI data and a Fed hike are the only current triggers that could stop the selloff, adding that he does not think anyone will want to be long rates otherwise. He also said there is unlikely to be any meaningful U.S. fiscal policy move in the near term, making monetary policy the last bastion of credibility. He said early trading in Australian spot bonds was only following overnight futures declines, but warned the downtrend could widen further. Tang added that the start of the Middle East conflict was also a bad day for Australia and New Zealand on Friday, as investors pulled out of high-beta markets to avoid risk, and said heavy stop-loss selling may also be deepening the weakness.