MNI: China CFETS Yuan Index Down 0.14% In Week of Aug 16

MNI: PBOC Net Drains CNY22.4 Bln via OMO Monday

MNI: PBOC Sets Yuan Parity Lower At 7.1415 Mon; +1.99% Y/Y

CHINA PBOC CONDUCTS CNY52.1 BILLION VIA 7-DAY REVERSE REPOS MON

CHINA SETS YUAN CENTRAL PARITY AT 7.1415 MON VS 7.1464

MNI BRIEF: Goolsbee Suggests Preference For Gradual Fed Cuts

Japan Jun Machine Orders 2.1% M/M

MNI JAPAN JUNE CORE MACHINE ORDERS +2.1% M/M; MAY -3.2%

MNI: BAKER HUGHES US RIG COUNT 586; OIL RIGS 483; GAS RIGS 98

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

AU-NZ 10Y Yield Differential Too Low

AUSSIE BONDS
Homepagemarkets-real-timeBulletMarketsFixed Income Bullets

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.


Keep reading...Show less
171 words

To read the full story

Close

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.

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.


Keep reading...Show less