CBA Suggest The AU/U.S. 10-Year Yield Spread May Peak Soon

Late on Monday CBA noted that “the Aussie/U.S. 10-Year yield spread has widened significantly during the recent period of volatility and now sits at around 85bp. But it still remains slightly below the peaks seen earlier this year. The volatility of the Aussie/U.S. spread is not replicated by the New Zealand/U.S. spread, which has been far more stable. We think that is a result of the RBA’s attempt to tread a different course than the RBNZ or the Fed, at least at first, which has now reverted back to the standard response. While it’s hard to be categorical against this background, the Aussie/U.S. spread seems likely to hit a peak soon. It’s hard for markets to price a significant downturn in the U.S. without that also spilling over into other markets”