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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUSSIE BONDS
The BoC is widely expected to cut its policy rate by another 25bps to 4.50% at this week’s meeting, with the markets pricing over 95% chance of a cut, up from less than 50% two weeks ago.
- From a cross-market perspective, the AU-CA 3-month swap rate 1-year forward (1Y3M) spread is currently at its highest level since December 2022. This spread sits within the upper half of the -50bps to +100bps range observed over the past two years. The 1Y3M differential serves as a proxy for the expected relative policy path over the next 12 months.
- A simple regression of the AU-CA cash 10-year yield differential, which is currently at its highest level since last December, against the AU-CA 1Y3M spread over the past 12 months suggests that the 10-year yield differential is currently at its fair value of +94bps.
Figure 1: AU-CA Cash 10-Year Yield Diff. (%) vs. AU-CA 1Y3M Swap Diff. (%)
Source: MNI – Market News / Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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