Current 10-Year Bond Yields (June 1–10, 2025)
Australia: The 10-year government bond yield rose to approximately 4.34% on June 6, 2025, after a slight increase from earlier levels around 4.53% in late May 2025. The Reserve Bank of Australia (RBA) recently cut the cash rate to 3.85%, contributing to some volatility in yields.
New Zealand: The 10-year government bond yield was about 4.64% on June 6, 2025, slightly up from around 4.59% at the end of May 2025. New Zealand’s official cash rate stands at 3.50% as of April 2025.
Interest Rate Differential
The 10-year bond yield differential between New Zealand and Australia is roughly:
4.64%−4.34%=0.30%
This means New Zealand’s 10-year bonds yield about 30 basis points more than Australia’s.
The policy interest rate differential is about:
3.50%(NZ)−3.85%(AU)=−0.35%,
indicating Australia’s cash rate is currently higher by 35 basis points.
Uncovered Interest Rate Parity (UIP) Implications
UIP theory states that the expected change in the exchange rate between two currencies equals the interest rate differential between their countries E[ΔS]=iNZ−iAUE[ΔS]=i NZ−i AU
Using the policy rate differential (-0.35%), UIP would imply the NZD should depreciate against the AUD by about 0.35% over the relevant horizon.
Using the 10-year bond yield differential (+0.30%), UIP would imply the NZD should appreciate against the AUD by about 0.30%.
The conflicting signals reflect that short-term rates favor AUD while long-term yields slightly favor NZD. In practice, exchange rates are influenced by risk premiums, growth expectations, and monetary policy outlooks beyond pure UIP.
Key Upcoming June 2025 Economic Data (Australia and New Zealand)
Australia:
Inflation rate update (next CPI release)
Employment and unemployment data for May 2025
Retail sales and business confidence reports
RBA’s monetary policy statement and any forward guidance on rates
New Zealand:
Inflation expectations and Q2 CPI data
Unemployment rate and labor market reports
Trade balance and manufacturing PMI
RBNZ commentary on interest rates and inflation outlook
These economic releases will be critical for shaping market expectations on future interest rates and yield curves, thereby impacting the AUD/NZD exchange rate.
Summary
Metric Australia New Zealand Differential (NZ - AU)
10-Year Bond Yield ~4.34% (June 6, 2025) ~4.64% (June 6, 2025) +0.30%
Policy Interest Rate 3.85% (May 2025) 3.50% (April 2025) -0.35%
UIP Expected Exchange Rate — — Mixed signals (±0.3%)
Key June Data Inflation, employment, RBA policy Inflation, labor market, RBNZ guidance
The slightly higher long-term yields in New Zealand versus higher short-term rates in Australia create nuanced dynamics for AUD/NZD parity. The final exchange rate direction will depend on upcoming economic data releases and central bank communications in June 2025.
In conclusion, while New Zealand’s slightly higher 10-year bond yields create a positive interest rate differential over Australia, the strong economic ties and global influences mean that Australian bond yield changes materially affect New Zealand yields. This dynamic plays a significant role in shaping the AUD/NZD exchange rate through interest rate parity and market expectations
#AUDNZD #FOREX
Australia: The 10-year government bond yield rose to approximately 4.34% on June 6, 2025, after a slight increase from earlier levels around 4.53% in late May 2025. The Reserve Bank of Australia (RBA) recently cut the cash rate to 3.85%, contributing to some volatility in yields.
New Zealand: The 10-year government bond yield was about 4.64% on June 6, 2025, slightly up from around 4.59% at the end of May 2025. New Zealand’s official cash rate stands at 3.50% as of April 2025.
Interest Rate Differential
The 10-year bond yield differential between New Zealand and Australia is roughly:
4.64%−4.34%=0.30%
This means New Zealand’s 10-year bonds yield about 30 basis points more than Australia’s.
The policy interest rate differential is about:
3.50%(NZ)−3.85%(AU)=−0.35%,
indicating Australia’s cash rate is currently higher by 35 basis points.
Uncovered Interest Rate Parity (UIP) Implications
UIP theory states that the expected change in the exchange rate between two currencies equals the interest rate differential between their countries E[ΔS]=iNZ−iAUE[ΔS]=i NZ−i AU
Using the policy rate differential (-0.35%), UIP would imply the NZD should depreciate against the AUD by about 0.35% over the relevant horizon.
Using the 10-year bond yield differential (+0.30%), UIP would imply the NZD should appreciate against the AUD by about 0.30%.
The conflicting signals reflect that short-term rates favor AUD while long-term yields slightly favor NZD. In practice, exchange rates are influenced by risk premiums, growth expectations, and monetary policy outlooks beyond pure UIP.
Key Upcoming June 2025 Economic Data (Australia and New Zealand)
Australia:
Inflation rate update (next CPI release)
Employment and unemployment data for May 2025
Retail sales and business confidence reports
RBA’s monetary policy statement and any forward guidance on rates
New Zealand:
Inflation expectations and Q2 CPI data
Unemployment rate and labor market reports
Trade balance and manufacturing PMI
RBNZ commentary on interest rates and inflation outlook
These economic releases will be critical for shaping market expectations on future interest rates and yield curves, thereby impacting the AUD/NZD exchange rate.
Summary
Metric Australia New Zealand Differential (NZ - AU)
10-Year Bond Yield ~4.34% (June 6, 2025) ~4.64% (June 6, 2025) +0.30%
Policy Interest Rate 3.85% (May 2025) 3.50% (April 2025) -0.35%
UIP Expected Exchange Rate — — Mixed signals (±0.3%)
Key June Data Inflation, employment, RBA policy Inflation, labor market, RBNZ guidance
The slightly higher long-term yields in New Zealand versus higher short-term rates in Australia create nuanced dynamics for AUD/NZD parity. The final exchange rate direction will depend on upcoming economic data releases and central bank communications in June 2025.
In conclusion, while New Zealand’s slightly higher 10-year bond yields create a positive interest rate differential over Australia, the strong economic ties and global influences mean that Australian bond yield changes materially affect New Zealand yields. This dynamic plays a significant role in shaping the AUD/NZD exchange rate through interest rate parity and market expectations
#AUDNZD #FOREX
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.