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AUSSIE BONDS: AU-US 10-Year Yield Differential Too Wide Vs. FV

AUSSIE BONDS
RegionGlobalBulletAPACFixed Income BulletsAustraliaMarkets

The AU-US 10-year cash yield differential stands at +29bps today, near the upper limit of the +/-30bps range maintained 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 about 11bps above fair value, estimated at +18bps.
  • 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 20bps. In contrast, the 10-year yield differential has widened by 5-10bps over the same period.  

 

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The AU-US 10-year cash yield differential stands at +29bps today, near the upper limit of the +/-30bps range maintained 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 about 11bps above fair value, estimated at +18bps.
  • 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 20bps. In contrast, the 10-year yield differential has widened by 5-10bps over the same period.  

 

Keep reading...Show less