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AUSSIE BONDS: AU-US10Y Spread Sits In Bottom Half Of Range

AUSSIE BONDS
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The AU-US 10-year cash yield differential sits at -15bps following today’s Q4 CPI data, firmly in the lower half of the ±30bps range that has largely held since November 2022.

  • A simple regression of the AU-US 10-year yield differential against the AU-US 1-year forward 3-month swap rate (1Y3M) differential over the past year suggests the current 10-year yield spread is near fair value, estimated at -13bps.
  • The 1Y3M differential, a key proxy for anticipated relative policy trajectories over the next 12 months, has traded within a relatively narrow range this year. However, it remains approximately 85bps lower than its mid-September level, having declined from +55bps to -30bps. 

 

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The AU-US 10-year cash yield differential sits at -15bps following today’s Q4 CPI data, firmly in the lower half of the ±30bps range that has largely held since November 2022.

  • A simple regression of the AU-US 10-year yield differential against the AU-US 1-year forward 3-month swap rate (1Y3M) differential over the past year suggests the current 10-year yield spread is near fair value, estimated at -13bps.
  • The 1Y3M differential, a key proxy for anticipated relative policy trajectories over the next 12 months, has traded within a relatively narrow range this year. However, it remains approximately 85bps lower than its mid-September level, having declined from +55bps to -30bps. 

 

Keep reading...Show less