Australian Bonds Weaker On Banks Action

As the world markets are rising and in turn, the Australian stock exchange, the Australian bonds are seen weaker.

There is an inverse relation between the stock indices and the bonds. As the bonds rise, the stock indices fall and as the stock exchanges rise, the bonds fall. The world markets have been rising this week, thanks to the ECB’s and some other banks intervention in to the European debt crisis.

This is helping most of the stock indices in the world to rise and in turn, the bonds to fall. The European bands have risen very swiftly in the recent past, due to the European Debt crisis and the downgrades of some big companies by the major credit rating service companies.

But, is this the only reason which is making the bonds to fall or pause for a moment? There are some other reasons as well. Six central banks have taken steps to boost the liquidity in the global markets.

This led to a sharp downfall in the bonds and a sharp uptick in the equity markets. A more detailed statement by the Bank of England which stated that it would take necessary steps to solve the Euro zone crisis has also boosted the sentiment in the equity markets. This made many investors to sell bonds and get in to equity.

Will this sentiment continue? Will the markets continue to rally and the Euro zone crisis in done? This Euro zone problem is not a small one which the banks can come out with a solution.

This is a lot bigger than many of them think. Europe’s debt problems, the problems with some big banks and many are making the world economy to come to a halt. Economy is weakening and in turn, the markets, too are following the same trend.

Maybe this is a shorter term trend which is helping the markets to rise and the bonds to fall. But, bonds and precious metals are the safest heaven at this point of time.

The comments coming out of the Bank of England were also a bit cautious on the global situation and the economy stating that there will be some serious downgrades in the nearby future.

So, altogether it is seen that the present situation for banks is a little bleak and investors would be better sitting on the sidelines or investing in bonds or precious metals which are considered defensives when the markets start to crack.        

Tags: Australian stock exchange, Banks Action, Europe’s debt problems

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