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BONDS: NZ-US 10Y Differential Lowest Since Mid-2021

BONDS
BulletMarketsFixed Income Bullets

NZGBs closed the day in a bull-flattening pattern, with benchmark yields ending flat to 4bps lower.  

  • The 10-year NZGB slightly outperformed, with the NZ-US and NZ-AU 10-year yield differentials tightening by 1-2bps.
  • The NZ-US 10-year differential, now at +10bps, is hovering near its tightest levels since mid-2021.
  • A simple regression analysis of the 3-month forward swap rate spread (1Y3M) over the past year indicates the 10-year yield differential is close to its estimated fair value of +9bps.
  • Notably, the regression error has fluctuated within a range of ±20bps over the past year, highlighting some variability in the relationship​.  
  • The 1Y3M differential continues to be a key driver of market expectations for long-term yield convergence.

 

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NZGBs closed the day in a bull-flattening pattern, with benchmark yields ending flat to 4bps lower.  

  • The 10-year NZGB slightly outperformed, with the NZ-US and NZ-AU 10-year yield differentials tightening by 1-2bps.
  • The NZ-US 10-year differential, now at +10bps, is hovering near its tightest levels since mid-2021.
  • A simple regression analysis of the 3-month forward swap rate spread (1Y3M) over the past year indicates the 10-year yield differential is close to its estimated fair value of +9bps.
  • Notably, the regression error has fluctuated within a range of ±20bps over the past year, highlighting some variability in the relationship​.  
  • The 1Y3M differential continues to be a key driver of market expectations for long-term yield convergence.

 

Keep reading...Show less