[8] The swap rate often trades above the government bond rate because it involves more credit risk. But the spread between the two has widened by around 20 basis points in recent months. In part this reflects the market's expectations about the future direction of monetary policy.
The market is assigning some probability to the scenario that the cash rate could be higher in 2024 than the Board's current forward guidance. [9] This expectation is being reflected in the swap rate, but not in the April 2024 bond rate, because the Bank is ensuring the bond rate remains at the target.