14 Mar 2014
AUD relationship with Aus bonds and US T-bills key
FXStreet (Guatemala) - Strategists at TD Securities explained that a relationship worth highlighting is the AUD compared with the spread between Australian bonds and US Treasuries.
Key Quotes
“In 2014 to date, the spread between 10yr yields has compressed to +125bp and widened to +150bp, and is taking the AUD along for the ride, selling off to USD0.87 in mid-January and the recent spread blowout to +145bps, prompted by the data flow just mentioned, is bound to be fanning investor support into the AUD”.
“On our estimates, we expect this spread to compress back to +120bp or so over the coming months as US Treasury yields resume their upward path towards 3%, which in turn is expected to take some of the heat out of the AUD. This is the key driver behind our mid-year target of USD0.88, whether the RBA remains neutral or not”.
“Next week, the calendar is full for the US, while the cupboard is bare for the AUD. While the AUD has rallied on strong data over the past two weeks, it will be seeking guidance from offshore next week”.
Key Quotes
“In 2014 to date, the spread between 10yr yields has compressed to +125bp and widened to +150bp, and is taking the AUD along for the ride, selling off to USD0.87 in mid-January and the recent spread blowout to +145bps, prompted by the data flow just mentioned, is bound to be fanning investor support into the AUD”.
“On our estimates, we expect this spread to compress back to +120bp or so over the coming months as US Treasury yields resume their upward path towards 3%, which in turn is expected to take some of the heat out of the AUD. This is the key driver behind our mid-year target of USD0.88, whether the RBA remains neutral or not”.
“Next week, the calendar is full for the US, while the cupboard is bare for the AUD. While the AUD has rallied on strong data over the past two weeks, it will be seeking guidance from offshore next week”.