Free Trial
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.
AUSSIE BONDS
As highlighted in a recent $-Bloc STIR update, year-end expectations now predict that Canada’s official rate will fall below Australia’s for the first time in this cycle, a situation not seen since 2018 if it comes to pass.
- Looking further ahead, the AU-CA 1Y3M swap differential—a proxy for the expected relative policy path in 12 months—stands at +80bps. This implies a 120bps increase in the AU-CA official rate differential from its current level of -40bps.
- Regarding the AU-CA 10-year differential, the current differential of +80bps is within the upper half of the +30bps to +100bps range observed over the past 12 months.
- However, a simple regression of the AU-CA cash 10-year yield differential against the AU-CA 1Y3M swap differential over the past 12 months suggests that the 10-year yield differential is currently 11bps below its fair value (i.e., 80bps versus +91bps).
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.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok