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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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The AU-NZ 10-year yield differential at -81bp sits only 5bp below fair value despite the 18bp narrowing sparked by the more stimulatory than expected NZ budget last week.
- A simple regression of the AU/NZ 10-year yield differential versus the AU-NZ 1Y3M swap differential suggests fair value is around -76bp versus the 10-year differential’s current level of around -81bp. The 10-year was at fair value at -62bp the day before the budget.
- The failure to open a wider gap with fair value reflects the 30bp narrowing in the AU-NZ 1Y3M swap differential. NZ STIR firmed post-budget on fears that the RBNZ would need to be more aggressive in lieu of the budget.
Figure 1: AU/NZ 10-Year Yield Differential Vs. 1Y3M Swap Differential
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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