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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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AU/NZ cash 10-year yield differential has pushed away from its multi-decade low of -100bp, which was reached after NZ's current account deficit deteriorated more than expected, to be currently -87bp, having been as high as -75bp earlier this week.
- While consistent with the relative price movement in AU and NZ STIR, the 10-year yield differential has started to unwind the mispricing evident at the multi-decade low.
- At its wides, a simple regression of the NZ/AU 10-year yield differential on the AU/NZ 1y1m OIS differential (over the current tightening cycle) suggested the 10-year yield differential was 20bp too negative, most likely reflecting the divergent current account situations in AU (record surpluses) and NZ (record deficits).
- The regression error is currently around -14bp.
Figure 1: AU/NZ 10-Year Yield Differential (% Y-Axis) Vs. AU/NZ 1Y1M OIS Differential (% X-Axis)
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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