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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 AU-NZ 10-year yield differential is -3bps today, now standing at -23bps compared to the recent high of -5bps in late July, which marked the highest level since August 2022.
- The recent move lower in the 10-year yield differential coincided with a move lower in the AU-NZ 3-month swap rate 1-year forward (1Y3M) spread leading up to the RBA’s August policy meeting.
- However, this move has reversed following the RBNZ’s decision to cut the OCR by 25bps on August 14, with the AU-NZ 1Y3M spread now approaching cyclical highs.
- Interestingly, the increase in the 1Y3M spread has not been reflected in the AU-NZ 10-year yield differential.
- A simple regression of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past 12 months suggests that the differential is 16bps below its regression fair value (i.e., -23bps versus -7bps).
- The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
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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