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AUSSIE BONDS: AU-US 1Y3M Spread Drives 10Y Diff. Lower

AUSSIE BONDS
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The AU-US 10-year cash yield differential is at -16bps today, firmer in the bottom half of the +/-30bps range that has largely prevailed since November 2022.

  • A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is close to fair value, estimated at -15bps.
  • The 1Y3M differential serves as a proxy for the anticipated relative policy trajectory over the next 12 months.
  • Since mid-September, the AU-US 1Y3M differential has narrowed by approximately 80bps from +55bps to -25bps. 

 

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The AU-US 10-year cash yield differential is at -16bps today, firmer in the bottom half of the +/-30bps range that has largely prevailed since November 2022.

  • A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is close to fair value, estimated at -15bps.
  • The 1Y3M differential serves as a proxy for the anticipated relative policy trajectory over the next 12 months.
  • Since mid-September, the AU-US 1Y3M differential has narrowed by approximately 80bps from +55bps to -25bps. 

 

Keep reading...Show less