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AUSSIE BONDS: AU-US 10-Year Yield Differential Above Fair Value

AUSSIE BONDS
RegionGlobalBulletAPACFixed Income BulletsAustraliaMarkets

Today, the AU-US 10-year cash yield differential is 2bps wider at +24bps.

  • At +24bps, the differential is near the upper bound of the +/-30bps range 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 past 12 months indicates that the 10-year yield differential is around 6bps above fair value (i.e. +18bps).
  • The 1y3m differential is a proxy for the expected relative policy path over the next 12 months.

 

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Today, the AU-US 10-year cash yield differential is 2bps wider at +24bps.

  • At +24bps, the differential is near the upper bound of the +/-30bps range 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 past 12 months indicates that the 10-year yield differential is around 6bps above fair value (i.e. +18bps).
  • The 1y3m differential is a proxy for the expected relative policy path over the next 12 months.

 

Keep reading...Show less