Free Trial
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.
BONDS
The NZ-US 10-year yield differential currently stands at +36 bps, up from its late July low of +14 bps, which was the narrowest level since late 2022. Prior to this, the differential had fluctuated between +20 and +80 bps since late 2022.
- The recent widening of the 10-year yield differential aligns with an increase in the NZ-US 3-month swap rate 1-year forward (1Y3M) spread.
- However, a simple regression analysis over the current tightening cycle suggests that the 10-year yield differential is about 10 bps wider than fair value, which would be +26 bps instead of the current +36 bps.
- It's important to note that the regression error was approximately +20 bps in mid-August, indicating some variability in the relationship.
- The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
Figure 1: NZ-US Cash 10-Year Yield Differential (%) Vs. Regression Fair Value (%)
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.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok