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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
Today, the AU-US 10-year cash yield differential is 4bp lower at -19bp after 10-year cash tsys finished 4bp cheaper on Thursday.
- At -19bp, the cash AU-US 10-year yield differential is currently in the lower part of the range of -30bp to +25bp which has been observed since November.
- The narrowing in the 10-year yield differential from +25bp in mid-June can be attributed to a 70bp narrowing in the AU-US 3-month swap rate 1-year forward (1y3m) over that period. The 1y3m differential is a proxy for the expected relative policy path over the next 12 months.
- A simple regression of the AU-US cash 10-year yield differential and the AU-US 1Y3M swap differential over the current tightening cycle indicates that the 10-year yield differential is currently 9bp too negative versus its fair value (i.e., -19bp versus -10bp).
Figure 1: AU-US Cash 10-Year Yield Differential (%) Vs. Model Fair Value (%)
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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