The RBA meets tomorrow to decide whether the raise interest rates or not. Looking at the implied yield curve (this graph updates every day), I suspect the answer is not.
Update: As promised Chris Joye has a post on Aussie bond prices. I think he addresses the issues directed against him in the comments thread.
Having said that, the rolling natural and political catastrophes that we have had to contend with in the recent past have, admittedly, made market pricing look prescient.
The substance of his argument relate to loose US monetary policy and international diversification away from US risk. John Quiggin has a good post on the US risk. He makes the excellent point that any US default would be temporary and that certainly makes ratings agencies job a lot harder – but doesn’t really reduce (very) short-term risks. Chris’ argument is that the international situation combines with local factors makes the yield curve a poor forecast instrument. Information to update our expectations becomes available at 2.30 pm today. A rate rise will suggest Chris is correct, but a no-change decision doesn’t necessary mean he is right. (A decline in rates might mean the RBA thinks the economy faces recession risk – I doubt that outcome).
Update II: No change in rates.