Aussie-Kiwi Yield Spread Is Set to Widen, Commonwealth Bank Says
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
CBA AU (Commonwealth Bank of Australia)
People
Jarrod Kerr (Commonwealth Bank of Australia)
Kevin Xuan Xie (Commonwealth Bank of Australia)
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UUID: 7947283
(Bloomberg) -- Sell New Zealand’s May 2021 bonds and buy similar-maturity Australian debt as the spread between the two will widen, according to Commonwealth Bank of Australia.
- Investors should enter the position with the gap at +5bps, and target +25bps, which matches the current cash-rate differential, rate strategists Jarrod Kerr and Kevin Xie write in note Thursday
- A stop should be placed at 0bp
- RBNZ cash rate likely to remain 25bps above RBA’s for foreseeable future
- Possible to see a temporary widening in New Zealand’s bond spread versus Australian debt and Treasuries on a change in N.Z. govt
- NOTE: Nation will hold general election Sept. 23
- Political angle isn’t “high conviction call” because history suggests markets are relatively immune to political changes from center right to center left
- NOTE: Spread between New Zealand and Australia’s 2021 bonds shrunk to 3bps Thursday, narrowest since May 2013, from as much as 64bps on Feb. 1
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
Tickers
CBA AU (Commonwealth Bank of Australia)
People
Jarrod Kerr (Commonwealth Bank of Australia)
Kevin Xuan Xie (Commonwealth Bank of Australia)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283