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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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Last week, the AU-NZ 10-year yield differential narrowed to around -100bp, its lowest level since the late 1990s on the back of a worse-than-expected deterioration in NZ’s current account deficit (-8.9% of GDP Vs. -8.5% expected) and the resultant comments from S&P about bond ratings.
- A simple regression of the AU/NZ 10-year yield differential versus the AU-NZ 12-month forward OIS differential (over the current tightening cycle) revealed that current account deficit concerns in NZ versus multi-decade high surpluses in Australia had been worth around 20-25bp on the 10-year differential.
- Ahead of tomorrow’s NZ Trade Balance for February, the same regression analysis suggested the AU-NZ 10-year yield differential was around 15-20bp too low based on the 12-month forward OIS differential (Figure 1).
Figure 1: AU/NZ 10-Year Yield Differential Vs. AU/NZ 12M Fwd. OIS 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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