Lower for longer? RBA dismisses rising bond yields

Rising bond yields have been the talk of the ASX town over the past few weeks. Government bond yields have spent most of 2021 rising from the historical lows that we saw last year. That has triggered some incredible share market volatility, particularly in the ASX tech space. Yesterday, we discussed how ASX tech shares were on the brink of a bear market, given the S&P/ASX All Technology Index (ASX: XTX) was approaching a 20% difference between its most recent high and its current level.

Well, today, those fears have been somewhat allayed. The All Technology Index is today up an impressive 3.65% at the time of writing.

ASX tech investors probably have the RBA to thank.

According to reporting in the Australian Financial Review (AFR) this morning, RBA governor Dr Philip Lowehas come out and told investors that wages growth would need to be "materially higher" for the Bank even to consider raising interest rates. The RBA has previously indicated that the record low cash rate of 0.1% would remain until 2024.

However, the bond market had other ideas.

Inflation first, rate hikes second for RBA

The AFR tells us that Dr Lowe noted that the bond market has been pricing in an interest rate hike as early as next year and another in 2023. He went on to say that "this was not an expectation that we share". For this to come to pass, Dr Lowe stated that inflation would need to be sustainable above 2-3%, and wages growth would need to be "sustainably" above 3%. It doesn't;t sound like he thinks this will happen soon: