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.
BONDS
Further to our previous discussion of the drivers of the AU-NZ 10-year yield differential, a simple regression of the AU/NZ 10-year yield differential versus the AU-NZ 1Y3M swap differential suggests fair value is around -65bp versus the 10-year differential’s current level of around -85bp.
- The last time the divergence from fair value was this large was in mid-March. At that time, the AU-NZ 10-year yield differential reached a concerning -100bp, marking its lowest level since the late 1990s. This sharp decline was triggered by a disappointing deterioration in NZ's current account deficit, which caught the attention of S&P bond ratings, leading to consequential comments from them.
- The current negative regression error could be in part due to speculation that the September 12 release of the NZ Pre-Election Economic and Fiscal Update (PREFU) may highlight a material fiscal deterioration.
Figure 1: AU/NZ Regression Error - 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.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok