The 10Y ACGB/UST spread has been volatile, but has remained nearer the low end of the trading range. In early March, the spread was converging on fair value because of extra rate hikes being priced into the US curve, but that dynamic has rapidly reversed as Fed rate cuts are priced back in.
Because of rapid hikes/cuts being priced into front ends, the fair value estimate is quite volatile, so we wouldn’t target a return of the ACGB/UST spread to +30bp (the current model value) in the near term. Fair value is still likely closer to zero, assuming the RBA and Fed still peak with a spread of about 100bp on the cash rates and both remain on pause for some time, rather than cutting dramatically as the market is pricing. - NAB Strategy
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