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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.
AUSSIE BONDS
Today, the AU-US 10-year cash yield differential has decreased by 3bps to -9bps after US tsys spiked to their highest levels for the year on Friday following the release of higher-than-anticipated PPI data.
- The 2-year yield surged to 4.72% following the data release before concluding 7bps points higher at 4.64%. Meanwhile, the 10-year yield experienced a 5bps increase to 4.28% after reaching an intraday peak of 4.33%. It is important to note, however, that cash US Treasuries are closed for the Presidents Day holiday.
- At -9bps, the cash AU-US 10-year yield differential currently sits in the bottom half of the range of +/-30bps which has been observed since November 2022.
- 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 16bps too low versus its fair value (i.e., -9bps versus +7bps).
- 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
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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