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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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The NZ-US 10-year yield differential has narrowed by 4bps to +18bps, its tightest level since late 2022. This differential has oscillated between +20 and +80bps since late 2022.
- The recent narrowing in the 10-year yield differential has been primarily driven by a narrowing in the NZ-US 3-month swap rate 1-year forward (1Y3M) spread, which has narrowed more than 160bps since its cyclical high in mid-2023.
- The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
- A simple regression of the AU-US cash 10-year yield differential against the AU-US 1Y3M swap differential over the current tightening cycle indicates that the 10-year yield differential is currently close to fair value (i.e., +18bps versus +21bps).
Figure 1: NZ-US 10-Year Yield Differential
Source: MNI – Market News / Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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