Just yesterday, March.26/2019, the Royal Bank of New Zealand not only continued the dovish tone of central banks in the west, but actually admitted that the next move will likely be a CUT.
We are at that point. I warned that in March time we will see central banks admitting there will be no more rate hikes. Now we are waiting to see which central bank will cut first.
I believe it will be Canada or Australia. We will be going to 0% and maybe even negative to try to keep this system propped up…even though we know it doesn’t work (Europe, Switzerland, Japan).
There is a lot of talk about the bond yields inverting and going lower…people are frontrunning eventual rate cuts. Remember, bond prices and yields are inverted. If Bond price goes up, yields go down and vice versa.
So how do we play this Canada and Australia trade? We go long Canada/Australia bonds, and short the Canadian/Australian dollar.
Both nations need to keep real estate propped. They will be cutting back to zero eventually. Again, after this, the confidence crisis will appear. Inflation will be going higher, inequality will keep growing, all the social problems will remain and get worse. There will eventually be a tipping point.