The Australian sharemarket is set for a positive start to the week as expectations of a strong corporate earnings season on Wall Street lift sentiment, even as anxious investors watch for signs that severe bond market turmoil could spill over into equities.
US Treasury yields have risen sharply since the war with Iran began in February, with the 10-year yield – a benchmark for the cost of borrowing worldwide – up 135 basis points to 5.23 per cent, the highest level in more than two decades.
Australian yields have also lurched higher, with the 10-year return hitting a 15-year peak of 5.43 per cent, up 37 basis points since late August. It is now hovering around 5.35 per cent.
“The biggest risk for shares is how bond markets will perform. Some think they moved too quickly in a short amount of time and wonder whether this is a temporary spike or something that will persist,” said Emanuel Datt, chief investment officer at Datt Capital.
Futures indicate that the S&P/ASX 200 Index will gain 0.4 per cent, or 37 points, extending last week’s rally when the market rose 0.4 per cent.