How the Australia curve changed across regimes
Historical yield curves provide more information than a time series of one maturity. They show whether a repricing originated at the policy-sensitive front end, whether long-term yields moved with or against it, and whether the market transitioned through inversion, flattening or steepening as the macro regime changed.
The spread between shorter Australian Government bonds and the 10-year maturity helps show how markets price the expected RBA path relative to longer-run inflation and growth risk.
The RBA targeted the three-year Australian Government bond yield as part of its pandemic policy framework.
Market pricing moved ahead of the policy framework and the yield target was discontinued.
Inflation pressure produced a steep repricing of the front and intermediate portions of the curve.