July 15, 2024 02:32 GMT
AU-US 10-Year Yield Differential Highest Since Feb But Below FV
AUSSIE BONDS
Today, the AU-US 10-year cash yield differential sits at +14bps. It's worth noting that cash US tsys are not trading during today's Asia-Pac session due to a public holiday in Japan.
- The cash AU-US 10-year yield differential, currently at +14bps, is at its highest level since February. This places it in the upper half of the +/-30bps range observed since November 2022.
- However, a simple regression of the AU-US cash 10-year yield differential against the AU-US 1Y3M swap differential over the current tightening cycle indicates that the 10-year yield differential is currently 17bps too low versus its fair value (i.e., +31bps versus +14bps).
- The 1y3m differential is a proxy for the expected relative policy path over the next 12 months.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: MNI – Market News / Bloomberg
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